Court Opinion

ID: 9591652
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:06:17.18939+00
Date Added: 2024-06-11T09:03:52.211112
License: Public Domain

ON REHEARING
*658Dwight L. Schwab, Portland, argued the cause for appellant. With him on the briefs were Cake, Jaureguy & Hardy and Jonathan U. Newman, Portland.
Cleveland C. Cory, Portland, argued the cause for respondent. With him on the brief were Hart, Spencer, *659McCulloch, Bockwood and Davies, Hugh L. Biggs and George H. Fraser, Portland.
*658On Rehearing
*659Before Warner, Chief Justice, and Bossman, Lusk, Brand, Latourette and Perry, Justices.
PEE CUBIAM.
This is a rehearing petitioned for by plaintiff. Our original opinion was handed down October 26, 1955, wherein we affirmed a judgment non obstante veredicto in favor of the defendant. In so doing we sustained a finding that the evidence conclusively showed that the defendant hospital was an eleemosynary institution at the time of plaintiff’s injuries and, as such, was exempt from liability arising out of the negligence of its employee.
The sole issue presented by the plaintiff’s petition, as well as in the original appeal, is whether or not the defendant institution is, in fact, eleemosynary in character, for as we said in our original opinion: * * if it is not an eleemosynary institution, then it must respond to a judgment for damages accruing by reason of its negligence.” 288 P2d 1064, 1065.
We preface what follows by noting that on appeal from a judgment notwithstanding the verdict the evidence will be construed in the light most favorable to the plaintiff. Baird v. Boyer, 187 Or 131, 140, 210 P2d 118; Callander v. Brown, 181 Or 279, 282, 178 P2d 922.
Immunity from liability upon the ground of being a public charity is an affirmative defense and therefore the burden of establishing the eleemosynary character of the institution was upon the party asserting that defense. Walsh v. Sisters of Charity of St. Vin*660cent’s Hospital, 47 Ohio App 228, 191 NE 791, 792. Also see 14 CJS 551, Charities, § 75.
Hospitals, as such, are not necessarily public charities. “The articles of incorporation are prima facie evidence of the character of the corporation as a charitable institution, but prima facie evidence may be rebutted by evidence that in fact the corporation has not lived up to its chartered objects.” Benton County v. Allen et al., 170 Or 481, 484, 485, 133 P2d 991; Hamilton v. Corvallis General Hospital Association, 146 Or 168, 176, 30 P2d 9; White v. Central Dispensary and Emergency Hospital, 69 App DC 122, 99 F2d 355, 119 ALR 1002.
We turn our attention to the various tests of the eleemosynary character of an institution as established by this court in previous decisions in an effort to determine whether or not there was any substantial evidence presented during the trial below from which the jury might justly conclude that the defendant hospital was not a charitable institution.
In Corporation of Sisters of Mercy v. Lane County, 123 Or 144, 155, 261 P 694, this court, quoting from 30 CJ 462, stated:
“The test which determines whether a hospital is charitable or otherwise is its purpose; that is, whether it is maintained for gain, profit, or advantage, or not. * * *” See 14 CJS 416, Charities, § 2.
Also see Hamilton v. Corvallis General Hospital Association, supra, at page 186.
We now reexamine the evidence bearing on the question of “whether it [the defendant] is maintained for gain, profit, or advantage.” The forerunner of the defendant institution, and which occupied the same *661premises, was a private hospital known as the Coffey Memorial Hospital. After the death of Dr. J. R. Coffey, his estate indicated a desire to sell the hospital and its assets. Thereupon a group of 15 doctors, later referred to as the founders, some of whom had previously practiced at the Coffey Hospital, associated themselves for the purpose of purchasing the Coffey Hospital. Some of the reasons motivating their action are found in the testimony of Dr. Manville, one of the founders, which follows:
“Q Will you tell the court and jury why Physicians and Surgeons Hospital was incorporated and what type of a corporation you and the other incorporators sought to make? Let’s start, — why was it incorporated?
“A The Coffey estate, upon the death of Dr. J. R. Coffey, who was the oldest son of the original founder, upon his death the estate desired to sell the hospital. For myself, I had been practicing there for several years. It seemed like home. I wanted to continue to practice there if it were at all possible. So with myself and 14 other doctors, some of whom had practiced at the hospital the same as I had for some little time, we formed a group for the purchase of the hospital, which was done, and it was organized on a non-profit, charitable basis for the purpose of carrying on the practice of medicine, for making available in this community hospital services, which were — of which there was a definite shortage at that time, and to serve this community to the best of our ability in a hospital that we could continue running under the high standards before — on which it had been existing before.”
Pursuant to an understanding with the Coffey estate, the founding doctors advanced $70,000 from their own funds as a down payment. The balance of the $250,000 purchase price was secured by a mortgage *662to the Coffey estate. Articles of incorporation were prepared and the defendant hospital was incorporated in June, 1945, under its present name as a charitable, non-profit institution under the provisions of OES 61.010 to 61.160. Article III of its charter reads in part as follows:
“This corporation is a purely non-profit corporation and is not formed for the purpose of pecuniary profit, and no portion of this corporation’s income, profit or surplus shall ever be devoted or paid over or used in any way for the benefit of any of its members, or the pecuniary benefit of any private individual.”
Later in the corporate organization the 15 founding doctors were known as “the members” of the corporation, and still later the name “governors” was substituted by the by-laws (July, 1951) for the term “members”. “The members” together constituted the body which periodically selected from its own number the six trustees, one of whom was an alternate trustee. The trustees in turn were the active managing body of the hospital. We shall, from this point on, refer to the founding doctors as “the members”. This makes the internal organization of the hospital somewhat unique in that it vests absolute control of the institution in the 15 members who were the founding doctors. All power, control and authority in the corporation consequently flows from the founders. These men, according to the testimony of W. G-. Lamer, defendant’s administrator and its executive officer, remain in office until they either resign, die, or quit practicing medicine.
We note that the successful operation of the corporation made it possible in the years following to repay to the 15 founding members all but $1.00 each of the $70,000 originally advanced by them. Each mem*663her maintains this token investment in order to comply with certain corporation laws of this state which require officers of a corporation to be interested parties. The corporation was organized without capital stock. No dividends have been paid, nor are there any provisions for the payment of dividends. During the life of the corporation no salaries, premiums, or rewards have ever been paid to any member of the staff or other individuals other than to employees. Income over and above operation expenses is directed to better patient care, equipment, buildings or such charity as the hospital extended and which charity is later referred to. Salaries are paid only to regular employees. There is no discrimination made with respect to the admission of patients because of race, creed or color.
The hospital had a medical staff at the time of trial numbering about 132 doctors. Medical policies are determined by this staff subject to the approval of the trustees. Appointments to the medical staff are made by the trustees for a period of one year. The staff members are entitled to use the facilities of the hospital but they have no control over the internal management of the corporation.
Plaintiff argues that this complete and absolute control of the respondent hospital was, and is, a gain or private advantage to the governors. Plaintiff also claims that since the appointment of doctors to the medical staff must be approved by the board of trustees each and every year, the members of the medical staff would not wish to incur the displeasure of the board by failing to support any of the medical policies recommended by the governors. In addition, argues the plaintiff, all the equipment, facilities and prestige of this modern hospital are available to the governors for life at no cost to themselves.
*664Plaintiff emphasizes the provision in Art I, § 1 of the Modified By-laws of 1947, reading:
“Provided, that any child or children of an active member who has died or has resigned may become an active member herein by meeting all of the requirements above specified [the qualifications that the founding members imposed upon themselves] save and except the practice period of Five (5) years which in this particular instance shall be cancelled.”
and maintains that a jury could infer from that by-law that the medical governors thereby created for their sons or designees the same private advantages accruing from the control of the hospital as they themselves now enjoy, one of which is the assurance that their offspring will have positions of control in a successful hospital should they choose to enter the field of medicine. Plaintiff also asserts that the right to designate one’s successor could be made the subject matter of a contract, and that a governor, desiring to sell his right to nominate a successor, might accrue a substantial consideration for this right.
In essence then, the position of the plaintiff is that, while it is true that the defendant corporation is not conducted for a profit in the ordinary sense of the word, there is a definite gain or advantage accruing to the founding members by reason of the existence of the corporation, there being, among other things, the assurance of a lifetime opportunity to practice their chosen profession in a modern metropolitan hospital as well as accessibility to the facilities, prestige and security necessarily flowing from association with such an institution.
We deem the provisions in the by-laws which vest lifetime control in the founders and which allow *665them to designate their successors by will are elements of valuable private advantage which a jury might properly consider in determining whether the defendant hospital was or was not operated for private advantage.
In Hamilton v. Corvallis Hosp. Ass’n, supra (146 Or 181) we said:
“A charitable organization is defined * * * as * * - *
“ ‘A corporation, the object of which is to provide a general hospital for sick persons, having no capital stock nor provision for making dividends or profits, deriving its funds mainly from public and private charity, and holding them in trust for the object of sustaining the hospital * * ”
The record shows that the total value of gifts, donations, bequests, etc., received by defendant corporation since its creation in 1945 has been very small. A substantial proportion of the amount received since that time has been donated by the hospital “members” themselves. Yet even these “donations” on the part of the members lose meaning, as such, when we examine Art XI of the Supplemental Articles of Incorporation for it is there provided that in the event of the corporate dissolution the donations made by its members shall be repaid to them after payment of corporation debts and obligations. The donations of the members are therefore in a sense contingent charities, or contingent debts of the hospital. The introduction of evidence respecting charitable donations was obviously an attempt by the defendant to meet one of the tests of the charitable character of a corporation as laid down in the Corvallis Hospital case, supra.
We do not say that there is any one principal and distinctive characteristic of a charitable institution as distinguished from a noncharitable institution. The *666fact that an institution, in all other respects eleemosynary in status, can support itself and its charitable enterprises directly from the profits accrued from normal business operation does not, we think, jeopardize such an institution’s character as a public charity. Source of income, however, along with all the other evidence, is an indicia of the character of a charitable institution which compels consideration.
Not only have we held in the Corvallis Hospital case that a distinctive characteristic of an eleemosynary institution is the fact that it derives its funds mainly from public and private charity but we have also said that once such funds are collected they are held in trust for the objects of the institution claiming a charitable character.
Concerning the donations received by the hospital since its formation, the following testimony of Mr. Lamer, its Administrator, makes it appear that these donations have not been treated as trust funds and conserved or invested as is usual with funds of this character:
‘ ‘ Q Ho you have any separate trust funds that are administered by the trustees or any group of trustees, on behalf of the hospital?
“A No, sir. I would say that the money referred to [meaning the donations approximating $15,000] a few minutes ago on those items all are still intact to — in case of a time that you couldn’t meet your monthly payment.
“Q Do you have any income from any trust funds which are administered? A No, sir.”
We are impelled, by the testimony of defendant administrator, to observe, in the words of the Corvallis Hospital case, that:
“An important feature of this case is the absence of any charitable trust for the defendant to *667administer. There is no income from a fund or funds created by contributions of benevolent and charitably minded persons to be used by the association in the relieving of the distress of the needy * # *99
We turn again to Mr. Justice Bailey’s opinion in the Corvallis case for another criterion of charitable character, where he says:
“The question of whether the hospital is maintained for the purpose of charity or for that of profit is to be determined not only from the powers defined in its charter but from the manner in which it is conducted * *
The following is a table o.f figures compiled from the testimony of the Hospital Administrator:

The term “Charity Account”, as used by the defendant for a given year, represents the aggregate of the cost for all patients that were admitted during the year as charity patients and from whom the hospital had never had any expectation of receiving any remuneration for its services.
The only figures furnished as to annual gross income and annual net profit are those appearing in the foregoing table.
During the trial the plaintiff introduced evidence of the ratio of charity patients to paying patients. *668This showed that the defendant ministered to about 19,680 persons during the year 1950-51. It also shows that only 24 charity patients were cared for during the same period. The Administrator testified that the waiting list for charity patients had been running 200 to 300 each month the year round, but did not represent that all on the waiting list were served by the hospital as charity patients. We have, in an earlier case observed that charity does not lose its character as such when it becomes sagacious (Gregory v. Salem General Hospital, 175 Or 464, 469, 153 P2d 837), and now add that financial sagacity and niggardliness are not synonymous terms.
The defendant hospital maintains no charity wards. It charges the “going rate” for all its services. There is charged off as bad debts about $25,000 a year, and this has been true for the past five or six years. But the mere failure to collect from some of its patients is not sufficient to convert a private corporation into a charitable institution. Danville Community Hospital v. Thompson (1947) 186 Va 746, 43 SE2d 882, 884, 173 ALR 525. As was well said in the Danville case: ‘ ‘ Many corporations would be surprised to learn that such an experience produced such a result.”
In the original opinion we noted that the defendant hospital had given free use of its facilities to the Volunteers of America and others, but neither the testimony nor the evidence indicates precisely what free services were supplied or the approximate value of these services. Indeed, the hospital’s Administrator testified: “We have no record of that.” Nor were records introduced by defendant showing that any services were performed. Nor was testimony given which would indicate to whom the services had been gratuitously rendered.
*669The trial court in its opinion noted testimony that radium was available to doctors without charge to be used in charity cases involving cancer. Further testimony showed that the usual charge for the use of this service was 2‡ per gram hour. We are unable to determine from the record whether the defendant corporation debits the amount of 2<¡¡ per gram hour to its “charity account” or elsewhere whenever radium is furnished under these circumstances. If in fact it does debit its “charity account” on such occasions, the defendant’s contributions to charity are no greater than those already considered. Inasmuch as we are bound to draw every inference in favor of the plaintiff upon this rehearing, must we not then infer that the hospital does debit its charity account in those instances wherein free radium is furnished?
This court in its original opinion refers to the vocational training, scholarships and nurses’ courses maintained by the defendant. But in reexamination of the record we find there is a dearth of testimony as to the extent and nature of these activities. The record is extremely vague on this point. We are not certain whether the defendant gives one or several scholarships. It does, however, seem apparent that the corporation receives material benefits from these classes in that students are used to assist registered nurses in the performance of hospital duties.
As we said earlier in this opinion, there is but one issue before us for decision, i.e., is the defendant in fact a charitable institution? We have not undertaken to set forth all the facts from whence a jury might infer that the defendant was not a charitable institution but only sufficient facts to indicate that we are now of the opinion that the circuit court was in error in grant*670ing judgment to the defendant hospital non obstante veredicto.
Our former opinion, therefore, is withdrawn, the judgment of the lower court reversed, and a judgment on the jury’s verdict in favor of plaintiff will be entered in lieu thereof.