Ackerman v. Physicians & Surgeons Hospital

298 P.2d 1026, 288 P.2d 1064, 207 Or. 646, 1956 Ore. LEXIS 204

• Court: Oregon Supreme Court
• Decided: June 27, 1956
• Status: Published

Opinions

PER CURIAM.

The plaintiff-appellant Dolores Ackerman brought an action against the defendant-respondent Physicians and Surgeons Hospital, an Oregon corporation (hereinafter called the hospital), for damages for injuries which she alleges were sustained as a result of respondent’s negligence while she was a patient in the hospital. The jury returned a verdict in her favor but the court thereafter, on motion, entered judgment notwithstanding the verdict, resulting in a dismissal of plaintiff’s complaint. It is from that judgment she appeals.

The motion for judgment non obstante veredicto was grounded on the premise that the evidence conclusively showed that the hospital at the time appellant suffered her injury was “an eleemosynary corporation organized and existing under and by virtue of the laws of the State of Oregon as a non-profit corporation, without capital stock or any provisions for making or distributing dividends or profits, for the purpose of owning and operating a general hospital.” The order which followed and the court’s memorandum opinion hereinafter referred to reveal that the court was so persuaded in making its now challenged judgment.

Two questions are projected for consideration by the record. First, is the respondent corporation an eleemosynary corporation? Second, if so, does it enjoy immunity for acts of negligence of the kind here sued upon?

We will give answer to these propositions in the inverse order of their presentation. The question relative to the immunity of the respondent hospital, if in fact a charitable institution, is foreclosed adversely to the appellant by Landgraver v. Emanuel Lutheran Charity Board, Inc., 203 Or 489, 280 P2d 301, decided February 9, 1955. The Landgraver decision was handed down subsequent to the filing of the briefs in the instant appeal.

The holding in the Landgraver case does not, however, conclude the only other and very important question concerning the claimed charitable character of the respondent hospital, for if it is not an eleemosynary institution, then it must respond to a judgment for damages accruing by reason of its negligence. In answer to this last question, we find ourselves in agreement with the lower court. Its learned, careful and painstaking opinion so fully covers the subject discussed that we adopt it as our own. That which follows is the circuit court’s memorandum opinion in its entirety except for certain minor changes by way of interpolation or excision designed to make it more nearly and appropriately conform to the record as we find it or to adapt it in form as the opinion of this court:

The only question as to the corporate character of the hospital is this: Was there any substantial evidence on the basis of which the jury could decide the defendant hospital was not a charitable corporation? This issue was presented to the jury under appropriate instructions defining charitable corporations.

As to the organization and conduct of the hospital, the facts addressed to this issue are undisputed. The issue thus becomes one of law and if it is decided that all the evidence, together with reasonable inferences to be drawn therefrom, fails to establish legal liability, i.e., that there is no substantial evidence establishing liability, then it follows that the motion for judgment n.o.v. was properly allowed. The facts are these:

The defendant hospital was incorporated as a charitable and nonprofit corporation as of July 1945 under the provisions of ORS 61.010 to 61.160. There were 15 original incorporators who advanced approximately $70,000, which was repaid to them without interest. There is no capital stock, no dividends, no salaries to staff nor to individuals. The only salaries go to employes. Excess of income over expenses is disbursed for improvement of facilities, equipment, purchase of a lot for future use, extension of the physical plant and matters incidental to the hospital operation. Physical properties and so forth go to charity in the event of dissolution of the corporation. Policy is determined by a board of governors, and staff members must be approved by this board. No patient may be treated except by a member of the staff. There are 182 staff members, about adequate for an operation of this size. TJnder the avowed and practiced policy as disclosed by the evidence, all persons are admitted without discrimination as to race, color or creed and regardless of ability to pay, although inquiry is always made at the time of admission and those who can pay are charged prevailing rates. Frequently collection agencies are employed to collect money owing, although charity patients are not billed. There is no evidence of any person being denied hospitalization because of inability to pay.

The 132 staff members bring their patients to the hospital and its facilities are available to such staff doctors on the same basis as the 15 founding doctors. Gifts such as furniture, equipment, surgical instruments, some cash, books, and labor have been made. There is free use of facilities to the Volunteers of America and others; also radium is made available. Certain aspects of vocational training are provided and some scholarships and nurses’ training courses are maintained.

There is no trust fund, as such, separate from general assets, although all assets are held subject to the original incorporation and conduct thereunder and revert to charity generally on dissolution. Gross income runs about $750,000 annually with a net of $60,000 to $75,000. About $28,000 is entered on the books as charity accounts and approximately $100,000 is carried as uncollectible accounts. The staff members pay nothing for use of the hospital facilities. Value of hospital properties is about $650,000. Donations are not too accurately valued but approximate $15,000.

In 1951, the year plaintiff was injured, 5,656 bed patients were “discharged” from the hospital and 4,184 patients were treated in the outpatient department, and in 1950-51 there were about 24 charity patients. The fact is established that the proportions of charity patients to all patients and of charity reflected in cash or its equivalent to gross cash income are very small. These are substantially all the facts pertinent to the question as to whether defendant is a charitable corporation.

The plaintiff-appellant argues as follows: Defendant hospital has the burden of proving that it is a charitable corporation, and rarely is a verdict directed in favor of the party having such burden. The jury may not have believed the defendant’s witnesses. They were not required to do so. The uncontroverted testimony is that the hospital hires collection agencies to collect at least some of its unpaid accounts. “ ‘The jury was entitled to conclude that some of these unpaid accounts turned over to the tender mercies of professional collectors were actually charity cases — persons bona fide unable to pay and needing help.’ ” Again: “ ‘Well might the jury conclude that charity is the exception, and not the rule, at defendant hospital, and that bona fide charity cases are rejected as such and treated as regular customers. Is the jury required to conclude that the hospital is living up to its high ideals as set forth in its Articles when the evidence shows that .0012% of its patients are charity cases? Could no reasonable jury infer from the evidence that collection agency eases are really charity cases?’ ”

The appellant thereafter discusses Hamilton v. Corvallis Hosp. Ass’n, 146 Or 168, 30 P2d 9, and Gregory v. Salem General Hospital, 175 Or 464, 153 P2d 837, and proceeds with consideration as to whether or not the staff physicians do not receive some gain, profit or private advantage, saying:

“ ‘Certainly none of the founding doctors got, or gets, cold cash dividends. But that is not the only thing men work for. There are many other things of value. By obtaining this hospital the 15 purchasing doctors absolutely assured themselves of a hospital in which to practice their profession until they died. Was not the jury entitled to infer a gain or a private advantage from that one fact alone ? The most beautiful part of the arrangement too is that it didn’t cost these doctors one red cent. The testimony showed that a doctor cannot long practice his profession successfully without a hospital to which he may take his patients. * * The by-laws provide that the hospital is governed by the governors. They have absolute power of decision as to policy making, rules and regulation. Everything must funnel through them as governors. They rule the roost as absolutely as any dictator. * * Is this power a private advantage? Is the jury to be foreclosed from determining that the hospital is run by and for at least the partial advantage of these original 15? * * Add all this together and the enormity of the private advantage to the governors (the original 15) is overwhelming in its scope. What is to prevent the jury from properly inferring that the governors are able to at all times insist on absolute subservience on the part of the staff? * * Surely, it may be argued that there is no direct evidence of this, but the jury may properly draw the inference from the uncontroverted evidence as to the corporate setup. * * Furthermore, cannot the jury determine that such right is a gain and private advantage in the private practice of these men in purchasing their own supplies? * * Cannot the jury infer that when the yearly profits are spent that equipment will be purchased that best serves the specialty or practice of one or more of the privileged 15 ? * * Possibilities and probabilities of gain, indirect profit and private advantage saturate the picture. It cannot be said that the defendant, with the burden of proof, has precluded the jury from determining that defendant is not charitable * *.’ ”

The question of hospitals and their operation as charitable corporations has had the consideration of this court in several cases, two of which we consider determinative of the questions here presented. The first is Hamilton v. Corvallis Hosp. Ass’n, supra, where we find at pp. 176-7:

“The question of whether a hospital is maintained for the purpose of charity of [sic] for that of profit is to he determined not only from the powers defined in its charter but from the manner in which it is conducted * * *.

"* * * * *

“The overwhelming weight of authority is to the effect that a hospital association organized and conducting its business as a charitable institution is not liable for injuries suffered by its patients due to the negligence of its employees * * *."

After detailing the facts in that case, the court reached the conclusion that the question of charitable corporation was properly submitted to the jury, the pertinent feature of the evidence apparently being that defendant, although organized as a charitable institution, was actually being conducted as a profit-making enterprise in the interest of the holders of its second mortgage bonds, said bonds having been issued by the defendant corporation and delivered to a trustee to be held for the benefit of the stockholders of the original corporation. The court, at p. 186, cited with approval 11 CJ 303, Charities, § 9, and said:

“* * * the principal and distinctive characteristics of charitable institutions are that they ‘derive their funds mainly from private and public charity and hold them in trust for the object of the institution. In other words, the test of whether an enterprise is charitable is whether it exists to carry out a purpose recognized in law as charitable, or whether it is maintained for gain, profit, or private advantage * * *.”

It is further said in 11 CJ 303, Charities, § 9:

“* * * Their [charitable corporations] principal and distinctive features are that they have no capital stock and no provision for making dividends or profits, but derive their funds mainly from public and private charity and hold them in trust for the object of the institutions * *

In Gregory v. Salem General Hospital, supra, we held that the evidence brought the defendant within the definition of a charitable institution as that term is defined in Benton Co. v. Allen et al., 170 Or 481, 133 P2d 991, and in Hamilton v. Corvallis Hosp. Ass’n, supra. The opinion in the Gregory case details the history and organization of the Salem General Hospital and the method in which it conducts its business, conforming in all substantial respects to the factual situation involved in the instant case. On trial in the Gregory ease, a verdict was directed in favor of defendant. This was affirmed on appeal. We quote from p. 470:

“The trial judge directed a verdict for the defendant pursuant to a belief that under the decisions of this court a charitable institution is not liable for an injury negligently inflicted by one of its employees. The crucial issue submitted by this appeal is whether or not a charitable institution is liable for its negligence * * *."

We thereafter reviewed authority and, applying the rule of stare decisis, recognized and upheld the principle of nonliability and held there was no jury question on the basis of the uncontradicted testimony.

In these cases the governing principles for determination of the issue of charitable corporations were the same, but different conclusions were reached in the Hamilton and Gregory cases because of different factual situations. The law is thus crystallized and it is the application of law to facts that concerns us — or rather in this case of determining whether a jury question is involved in uneontradicted evidence evaluated by our declared case law.

It is true that the defendant hospital has the burden of proof to establish its existence and operation as a charitable corporation with no gain, profit or advantage to any individual. The recital of the evidence above sustains this burden. There is not a scintilla, let alone any substantial evidence to the contrary. All the indieia of charitable corporations are present in the hospital’s organization, incorporation, management and control. Its legal setup and its actual operation .conform to all requirements. Mrs. Ackerman’s argument that, though nominally so organized, the hospital is actually not living up to its obligation as a charitable corporation, is grounded on suspicion and not on proof of any fact or reasonable inference therefrom. Appellant criticizes the small amount of eharity, the few charity patients, the few dollars actually allocated thereto, the lack of any specific trust fund and the small amount of gifts as indicative of a nominal rather than a real charity, and argues the jury may so infer. However, in the light of positive evidence covering all elements necessary to immunize defendant hospital from tort action, we cannot recognize such suspicions as substantial evidence. The fact that gifts are few, charity patients limited in number and amounts devoted thereto small, does not justify an inference that defendant has abandoned its charitable concepts and is, in fact, operating for profit. Actual demands on charity, if met, are sufficient to establish a charitable operation. The volume of charity is of minor consequence. As to trust funds, all assets accumulated and accumulating are so held.

There is no gain, advantage or benefit accruing to any person as a result of the respondent hospital’s operation that contravenes its charitable character. Plaintiff does not contend any persons gain financially from cash receipts or in any other manner from the hospital operation but asserts that the 132 doctors on the staff have a special advantage accruing by use of the hospital facilities without cost. Concerning this the appellant argues that this use of the facilities without cost is of great value to the doctors on the staff for the reason that no doctor can carry on a very extensive practice without accessibility to a hospital and this availability of the respondent hospital’s facilities is therefore in the nature of a gain, benefit and advantage personal to the staff doctors. It does not appear that the staff physicians occupy other than the conventional relationship existing between doctor and hospital. So long as the number of staff doctors is not so limited as to suggest a monopoly, and surely this may not be suggested here, the incidental advantage of having a place to treat charitable and other patients does not stamp it as a benefit which, if existent, renders a corporation noncharitable.

In Benton Co. v. Allen et al., supra, we said, at p. 492:

“* * * It might be argued that this exemption indicates that the corporation is operated to some extent for the private profit of those pioneer physicians who founded the hospital, but, bearing in mind that the hospital was in operation for some three years before the reorganization and that some control over the personnel of the medical staff by the trustees of the hospital is desirable, we think that the preference which was thus given to the pioneer physicians, whose medical and surgical skill and whose ethical character were known, in itself, would not affect the corporation’s charitable character.”

If it be the law that, under the circumstances of this case, a benefit, gain or advantage accrues to staff physicians, then there can be no charitable corporation. There is, in our opinion, no evidence in this case justifying submission to the jury of the issues here presented. The motion for judgment n.o.v. was properly allowed.

Affirmed.