Court Opinion

ID: 9752349
Source: CourtListenerOpinion
Date Created: 2023-08-28 18:00:12.675905+00
Date Added: 2024-06-11T07:25:45.296694
License: Public Domain

Murphy, C. J.

dissenting:

The majority concludes that the corporation known as the Board of Governors of the Memorial Hospital of Cumberland (the Hospital) is an agency of the City of Cumberland; it reasons that there is no provision in the Hospital’s legislative charter that could not have been included in the charter of a corporation established under the general corporation laws and, therefore, under Art. Ill, § 48 of the Maryland Constitution, the charter can only be valid if it is one for municipal purposes. In my opinion, however, Chapter 411 of the Acts of 1927 created a private corporation with a governing body not obtainable under the general incorporation laws, viz., a board which included two governmental officials, each serving in an ex-officio capacity. No provision existed in the general law for the appointment of such governmental officers as ex-officio board members. The general law in effect when the Board was created provided that corporations were to “be formed in manner following.” Code (1924) Art. 23, § 3. The “manner” referred to in § 3 is delineated in the remainder of Art. 23, but nowhere is there found support for the proposition that the type of ex-officio board memberships mandated by the Legislature in creating the Hospital corporation could be achieved under the general corporation law. It has been held that matters in the incorporation papers, which are not warranted by law, are of no effect and may be treated as surplusage. State v. Penn-Beaver Oil Co., 34 Del. 81, 143 A. 257 (1926). In my view, the provision in the Hospital’s charter for the ex-officio membership on the governing board of the Mayor and President of the County *229Commissioners was not responsive to any specification in the general law and could not have had any force and effect absent the special act. The majority reads the general law in 1927 as permitting the inclusion in the charter of anything not specifically forbidden by law. But while the general law did permit incorporation for any purpose not forbidden, it still required every aspect of the corporate formation to correspond to and be consistent with the statute, and ex-officio membership of governmental officers was not provided for by the Code. Had there been no special act the provision would have had no claim to the dignity and effectiveness of a charter regulation. I therefore conclude that the special act was necessary to create the board mandated by the Legislature in Chapter 411 of the Acts of 1927. Consequently, Section 48 of Art. 3 of the Constitution of Maryland should play no part in determining whether the Hospital is a municipal agency of the City of Cumberland.
Had the Court properly discounted the relevance of incorporation by special act, it would have concluded that the Hospital is not a municipal agency or instrumentality. As the majority points out, the Hospital was created by Chapter 411 of the Acts of 1927. It was there provided that the Mayor and City Council of Cumberland was authorized to expend up to $400,000 of bond proceeds for the purpose of taking title to land and erecting a hospital under the direction of a Board of Governors. Section 6 of the Act created a Board of Governors consisting of seven members, two of whom were ex-officio. As to the individual Governors named, the Board was self-perpetuating in that it was authorized to fill vacancies which occurred among the general members. The Board was empowered to select the land for the hospital, title to which was to be in the name of the Mayor and City Council of Cumberland and it was to select plans for the building and enter into contracts for the erection and equipping thereof. Under Section 9 of the Act the Board was given the power to make rules and regulations for the operation and maintenance of the hospital. The Board was empowered under Section 10 to regulate charges, salaries, and to hire employees. Section 11 of the Act authorized (but did not require) the Mayor and *230City Council to appropriate amounts necessary to cover deficits in operation and maintenance of the hospital.
By Chapter 515 of the laws of 1929, the provisions of Chapter 411 of the Acts of 1927 were amended; the Board was thereby “made and constituted a body politic and corporate,” given perpetual succession, and the capacity to sue and be sued. In addition, the Board was granted all powers necessary and proper to operate and manage a hospital “as fully as if incorporated for such purposes under the provisions of the Public General Laws of Maryland.”
The distinction between public and private corporations is one of long standing. A comprehensive review of the Maryland authorities is to be found in the case of Kerr v. Enoch Pratt Free Library, 54 Fed. Supp. 514, 523:
“The legal test between a private and public corporation is whether the corporation is subject to control by public authority, state or municipal. To make the corporation a public one, its managers, whether trustees or directors, must be not only appointed by public authority but subject to its control. This has been the Maryland law since the early case of Regents of University of Maryland v. Williams, 9 Gill & J., Md., 365, 31 Am. Dec. 72 (dealing with the University of Maryland prior to its reorganization in 1920 when it became for the first time a governmental institution), and in the similar well known case of Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 671, 4 L. Ed. 629, it was said:
‘When [a] corporation is said at the bar to be public, it is not merely meant, that the whole community may be proper objects of the bounty, but that the government have the sole right, as trustees of the public interest to regulate, control, and direct the corporation, and its funds, and its franchises at its own good will and pleasure.’
“And this test has been reaffirmed and applied in *231subsequent cases. St. Mary’s Industrial School v. Brown, 45 Md. 310; Clark v. Maryland Institute, 87 Md. 643, 41 A. 126; Finan v. City of Cumberland, 154 Md. 563, 141 A. 269; University of Maryland v. Murray, 169 Md. 478, 182 A. 590, 103 A.L.R. 706 (dealing with the University of Maryland after its reorganization in 1920), and the general law on the subject is to the same effect. 18 C.J.S., Corporations, § 18, p. 394 et seq.; Fletcher, Cyc. Corp. Vol. I, p. 194 et seq.” (Emphasis in original.)
Applying the “control” test in the present case, it is clear that the ex-officio board membership of the Mayor does not give the City of Cumberland sufficient control over the Hospital to constitute it a public corporation. The Board is self-perpetuating so that its actions cannot be effectively controlled by the City. It is authorized by the act creating it to manage its own internal affairs, independent of government control, and it is entirely separate from and independent of the City in its corporate acts and control. No obligation exists between the Hospital and the City to discharge a municipal function. The fact that the Hospital’s construction funds were provided by a City bond issue does not alone make the Hospital a public corporation. It frequently occurs, of course, that private corporations are financially aided by governmental bodies where the public interest is involved in the appropriation. The income of the Hospital is derived from patient fees, appropriations from the State of Maryland for the care of indigent patients, and from bequests. Nor does it appear from the record that the City has ever appropriated operating funds for the Hospital. The City does not include the Hospital in its budget, and it is powerless to change a decision made by the Hospital’s Board. I believe, therefore, that the Hospital is a private corporation and that appellee’s request for information under Article 76A was properly denied.
I am authorized to say that Judge O’Donnell joins in the dissent.