Complete Service Bureau v. San Diego County Medical Society

272 P.2d 497, 43 Cal. 2d 201, 1954 Cal. LEXIS 241
CourtCalifornia Supreme Court
DecidedJuly 9, 1954
DocketL. A. 22535
StatusPublished
Cited by24 cases

This text of 272 P.2d 497 (Complete Service Bureau v. San Diego County Medical Society) is published on Counsel Stack Legal Research, covering California Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Complete Service Bureau v. San Diego County Medical Society, 272 P.2d 497, 43 Cal. 2d 201, 1954 Cal. LEXIS 241 (Cal. 1954).

Opinions

SHENK, J.

This is an appeal from a judgment for the Complete Service Bureau and certain physicians and laymen connected with it as cross-defendants. Equitable relief was denied to the San Diego County Medical Society and 32 individual physicians as cross-complainants. The general problem is whether the activities of the cross-defendants constitute the unlawful practice of medicine as alleged in the cross-complaint.

On October 16, 1948, Complete Service Bureau, hereinafter called CSB, and three of the physicians associated with it filed a complaint against the San Diego County Medical Society and several of its members. The complaint alleged that the defendants in conjunction with the California Medical Association and the American Medical Association were engaged in a conspiracy in restraint of trade. It prayed for damages and equitable relief. The defendants answered and filed a cross-complaint. The cross-complaint alleged that CSB, Group Property, Incorporated, and William David Parmer were unlawfully engaged in the corporate and lay practice of medicine by controlling the group practice of medicine carried on by CSB; that the physicians connected with CSB [205]*205were unlawfully aiding and abetting the lay practice of medicine; that fees paid to CSB for medical services were, in effect, fee-splitting with an unlicensed person and that such a practice is unlawful; that CSB obtains patients through intensive solicitation; that the commercialization of the practice of medicine is inherent in the activities of CSB, Group Property, and Parmer; that this is harmful to the public health and welfare and in addition constitutes an invasion of the property rights of the San Diego County Medical Society and the individual cross-complainants; that much of the advertising engaged in by the defendants is misleading; and that the practices engaged in by the cross-defendants amount to unfair competition with respect to the members of the San Diego County Medical Society.

It appears that in 1939 William David Parmer, Lester Seaman, and Robert Perrott, all laymen, organized CSB under the general nonprofit corporation law, now Corporations Code, section 9200. The articles of incorporation stated that the main purposes of CSB were to establish a fund by periodic payments on the part of its members to be used to defray the costs of medical services and hospital care; to supply or procure for members and their families medical, hospital, and other services at the lowest cost, and to furnish these services to its members “without profit to any agency.”

After its incorporation in 1939 CSB arranged with Doctor Stevenson and his associates to do the medical work for its members. Originally the contracts issued to the members were in the name of Doctor Stevenson or his group. After 3 946, subscribers were given agreements in the name of CSB. These agreements stated that CSB agreed to provide medical, surgical, and hospital services according to the provisions set forth; that the dues were $2.50 per month; that the subscriber was entitled to up to 30 days’ hospitalization for each illness or injury, and was entitled to ambulance service up to $10 for each illness or injury, and that the subscriber was entitled to medical services in accordance with the schedule of fees listed. The fee schedule ran from $1.50 for an office visit to $95 for minor or major surgery.

CSB now has a panel of 10 licensed physicians to treat its subscribers. Included among these physicians are Doctor Chester J. Antes, who is a former Director of Maternal and Child Hygiene of the Missouri Board of Health, a former instructor at the Washington University Medical School, and a licentiate of the American Board of Pediatrics; Doctor [206]*206Marcus G. Kelly, who is a past president of the Gila County, Arizona, Medical Society, a fellow of the American College of Surgeons, and a fellow of the' American Medical Association ; Doctor Grant W. Lee, who is an associate of the International College of Surgeons; and Doctor George R. Stevenson, who is a life member of the American College of Surgeons. These and the other physicians included in the panel are compensated according to a unit system. The patients are billed by CSB for the services performed by the doctors and the bills are collected by CSB, which now has approximately 10,000 members. Some of them have voting rights and all of them are entitled to those rights within a certain period of time.

In 1939 CSB entered into a contract with Parmer to employ him as business manager for 20 years. CSB occupies a medical building under an oral lease with Group Property. Parmer and Doctor Stevenson were the two principal shareholders of Group Property, which is a stock corporation. Under the lease CSB pays as rental 10 per cent of its income. Group Property has spent about $100,000 in remodeling, fixtures, and furnishings for the medical building. No salaries are paid by Group Property and no dividends have been declared or paid.

From October, 1948, until September, 1951, the parties were engaged in matters of pleading in the superior court. The defendants and cross-complainants moved to have the equity issues tried by the court before submitting the law issues to the jury. This motion was granted. The trial commenced on September 12, 1951. Shortly thereafter the plaintiffs dismissed the equity features of their complaint with prejudice. The trial was then directed to the equitable issues raised by the cross-complaint. At the conclusion of the trial the defendants moved for a judgment on the pleadings with respect to the plaintiffs’ complaint, contending that with the equity features removed it did not state a cause of action. The trial court denied the motion and rendered its decision on all the equitable issues raised by the cross-complaint in favor of the cross-defendants. Findings of fact and conclusions of law were made and filed upon which judgment was entered. The cross-complainants appeal from the judgment. Since the appeal was taken Mr. Parmer has passed away and his wife, as administratrix, has been duly substituted in his place.

Whether an action such as this may be prosecuted in [207]*207behalf of the physicians of California to prevent the illegal practice of medicine seems never to have been decided by the courts of this state. (Chalmers-Francis v. Nelson, 6 Cal.2d 402, 404 [57 P.2d 1312].) It is unnecessary to decide that question now for, on September 9, 1953, section 2436 of the Business and Professions Code went into effect. (Stats. 1953, p. 1423.) That section provides: “Whenever any person has engaged or is about to engage in any acts or practices which constitute or will constitute an offense against this chapter, the superior court of any county, on application of the board or of 10 or more persons holding physician’s and surgeon’s or chiropodist’s certificates issued under this chapter, may issue an injunction or other appropriate order restraining such conduct. Proceedings under this section shall be governed by Chapter 3 of Title 7, Part 2, of the Code of Civil Procedure, except that no undertaking shall be required in any action commenced by the board.” This law is applicable to the questions presented on this appeal for “whatever may be the law applicable to appeals generally, the rule is well settled that on appeals involving injunction decrees, the law in effect when the appellate court renders its opinion must be applied.” (Tulare Irr. Dist. v. Lindsay-Strathmore Irr. Dist.,

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Complete Service Bureau v. San Diego County Medical Society
272 P.2d 497 (California Supreme Court, 1954)

Cite This Page — Counsel Stack

Bluebook (online)
272 P.2d 497, 43 Cal. 2d 201, 1954 Cal. LEXIS 241, Counsel Stack Legal Research, https://law.counselstack.com/opinion/complete-service-bureau-v-san-diego-county-medical-society-cal-1954.