American Bank & Trust Co. v. Community Hospital

• Citation: 36 Cal.3d 359,204 Cal.Rptr. 671,41 A.L.R.4th 233,683 P.2d 670
• Decision Date: 09 July 1984
• Docket Number: INC,S.F. 24171,GATOS-SARATOG
• Parties: , 683 P.2d 670, 41 A.L.R.4th 233 AMERICAN BANK AND TRUST COMPANY, as Special Administrator, etc., Plaintiff and Respondent, v. COMMUNITY HOSPITAL OF LOS, Defendant and Appellant.
• Court: United States State Supreme Court (California)

Page 671

204 Cal.Rptr. 671

36 Cal.3d 359, 683 P.2d 670, 41 A.L.R.4th 233

AMERICAN BANK AND TRUST COMPANY, as Special Administrator, etc., Plaintiff and Respondent, v. COMMUNITY HOSPITAL OF LOS GATOS-SARATOGA, INC., Defendant and Appellant.

S.F. 24171.

Supreme Court of California In Bank.

July 9, 1984.

Thomas R. Fellows, Robinson & Wood, San Jose, for defendant and appellant.

John H. Larson, County Counsel, Peter R. Krichman, Deputy County Counsel, Los Angeles, Hassard, Bonnington, Rogers & Huber, David E. Willett, Maureen E. Corcoran, Howard Hassard, Charles Bond, San Francisco, Musick, Peeler & Garrett, James E. Ludlam, Los Angeles, Horvitz & Greines, Ellis J. Horvitz, Marjorie G. Roman, Kent L. Richland, John L. Klein, Encino, Livingston & Mattesich, James M. Mattesich, Sacramento, Fred J. Hiestand, Paul Halvonik, Berkeley, L. Savannah Lichtman, San Francisco, Donald L. Reidhaar, James E. Holst, John F. Lundberg Berkeley, Alschuler, Grossman & Pines, Burt Pines, Howard Wollitz, Latham & Watkins, Bryant C. Danner, Donald P. Newell, Joseph A. Wheelock, Jr., Los Angeles, Milton A. Miller, Newport Beach, Natalie E. West, City Atty., Berkeley, George Agnost, City Atty., Burk E. Delventhal and Thomas J. Owen, Deputy City Attys., San Francisco, amici curiae for defendant and appellant.

Popelka, Allard, McCowan & Jones, Bernard J. Allard, Donald D. Howard, Stephan A. Barber, San Jose, and Michael J. Murray, San Francisco, for plaintiff and respondent.

Arne Werchick, Sausalito, Leonard Sacks, Northridge, Glen T. Bashore, North Fork, Ralph Drayton, Sacramento, Richard D. Bridgman, Oakland, Robert E. Cartwright, San Francisco, Ian Herzog, Edward I. Pollock, Los Angeles, Harvey R. Levine, San Diego, Stephen I. Zetterberg, Claremont, Wylie Aitken, Santa Ana, Sanford M. Gage, Beverly Hills, J. Nick DeMeo, Santa Rosa, David M. Harney, Michael F. Dillingham, Franklin C. Valvo, Los Angeles, and Frederick Barak, Hollywood, amici curiae for plaintiff and respondent.

KAUS, Justice.

In May 1975, the Governor--citing serious problems that had arisen throughout the state as a result of a rapid increase in medical malpractice insurance premiums--convened the Legislature in extraordinary session to consider measures aimed at remedying the situation. ¹ In response, the Legislature enacted the Medical Injury Compensation Reform Act of 1975 (MICRA) (Stats.1975, Second Ex.Sess. 1975-1976, chs. 1, 2, pp. 3949-4007), a lengthy statute which attacked the problem on several fronts. In broad outline, the act (1) attempted to reduce the incidence and severity of medical malpractice injuries by strengthening governmental oversight of the education, licensing and discipline of physicians and health care providers, (2) sought to curtail unwarranted insurance premium increases by authorizing alternative insurance coverage programs and by establishing new procedures to review substantial rate increases, and (3) attempted to reduce the cost and increase the efficiency of medical malpractice litigation by revising a number of legal rules applicable to such litigation.

This case involves a wide-ranging constitutional challenge to one of the provisions of MICRA affecting medical malpractice lawsuits--a provision codified as section 667.7 of the Code of Civil Procedure. ² Section 667.7 provides that when a plaintiff in a medical malpractice case has sustained "future damages" of $50,000 or more, compensation for those future damages is to be paid periodically over the course of time the plaintiff incurs the losses, rather than in a lump sum payment at the time of judgment. Plaintiff attacks this "periodic payment of damages" provision on a variety of grounds, contending, inter alia, that it violates the state and federal constitutional guarantees of due process, equal protection, and the right to jury trial.

As explained hereafter, we have concluded that section 667.7 does not deny due process or equal protection. In order to avoid a potential conflict with the right to trial by jury, however, we conclude that the provision should be interpreted to require the jury to designate the portion of its award attributable to future damages. As so interpreted, we conclude that the provision is constitutional.

I

For purposes of this appeal, the facts may be briefly summarized. Late in 1976 after a brain scan had disclosed a lesion or tumor, plaintiff Mary English ³ was admitted to defendant Community Hospital of Los Gatos-Saratoga for surgery. On the eve of her scheduled operation, she fainted or fell in a shower stall and suffered severe burns to her thigh, hip, and groin, as a result of overheated water. After the burns had been treated and dressed by her neurosurgeon, the brain surgery proceeded as scheduled. The tumor, though then in remission, was found to be malignant and of a type which reportedly results in death within one year in 95 percent of all cases. Following release from the hospital, plaintiff received radiation and chemotherapy treatments.

Plaintiff was treated for her burn injuries by a plastic surgeon under whose care a gradual but steady healing took place. Because of the burns, however, she was totally disabled for four months and partially disabled for two more months. Intermittent breakdown and blistering of the healed tissues continued to occur.

Alleging that defendant's negligence had led to her fall in the shower and to her severe burns, plaintiff brought the present action to recover for the resulting damages. At the time of trial, some 14 months after the accident, plaintiff still suffered residual disability caused by recurring blisters, and scarring in three of the four burn areas had resulted in a permanent cosmetic deformity. Plaintiff's doctor testified that it was reasonably probable that future surgery would be required, and that such surgery would be followed by periods of total and partial disability to permit proper healing. Plaintiff testified that she had not been able to work in 1977, the year following the accident, that she did not anticipate returning to work in 1978 because the condition of her left knee and leg prevented her from driving a car, and that if future surgery were recommended she "would certainly do it."

At the conclusion of the trial, the jury rendered a general verdict for $198,069.88 in favor of plaintiff. After the verdict was returned, defendant raised the periodic payment issue for the first time, moving for an order of periodic payment of future damages pursuant to section 667.7. The trial court, while concluding that the section was by its terms applicable, denied defendant's motion on the ground that the provision was unconstitutional. The court relied on two theories: (1) it concluded that the provision denies equal protection by granting a privilege to health care defendants that is not afforded to other defendants, and (2) it held that the provision denies due process to the spouse of an injured plaintiff by limiting the damages that a defendant is obligated to pay in the event of the plaintiff's death. In light of its constitutional ruling, the trial court entered a lump sum judgment in favor of plaintiff in the amount of the verdict.

Defendant now appeals from the judgment, ⁴ contending primarily that the trial court's constitutional rulings with respect to section 667.7 are in error. ⁵ In response plaintiff claims that the provision is unconstitutional both on the grounds relied on by the trial court and on additional grounds as well. Numerous amicus briefs have been filed on both sides of the case.

II

At common law, a plaintiff who suffers bodily injury at the hands of a tortfeasor has traditionally been compensated for both past and future damages through a lump sum judgment, payable at the conclusion of the trial. (2 Harper & James, The Law of Torts (1956) § 25.2, p. 1303.) Over the past 30 years, however, several tort scholars--noting that lump sum awards are often dissipated by improvident expenditures or investments before the injured person actually incurs the future medical expenses or earning losses--have advocated the legislative adoption of a "periodic payment" procedure as a reform measure which would, in these commentators' view, benefit both plaintiffs and defendants. (See id. at pp. 1303-1304; Keeton & O'Connell, Basic Protection for the Traffic Victim--A Blueprint for Reforming Automobile Insurance (1965) pp. 351-358; Henderson, Periodic Payments of Bodily Injury Awards (1980) 66 A.B.A.J. 734.) In the last decade, many states have enacted provisions authorizing the periodic payment of damages in a variety of tort fields, ⁶ and, in 1980, the National Conference of Commissioners on Uniform State Laws approved a "Model Periodic Payment of Judgments Act" embodying this revised approach to compensation for future tort damages.

Section 667.7--the provision at issue here--represents the Legislature's initial adoption of the periodic-payment-of-damages concept into California tort law. The section--set forth in full below ⁷--provides generally that when a plaintiff in a medical malpractice action obtains an award of $50,000 or more for "future damages," the trial court, on motion of either party, shall enter a judgment providing for the periodic payment of those damages. Explaining that the legislative intent is that "courts will utilize such judgments to provide compensation sufficient to meet the needs of an injured plaintiff and those persons who are dependent on the plaintiff for whatever period is necessary while eliminating the potential windfall from a lump-sum recovery which was intended to provide for the care of an injured plaintiff over an extended period who then dies shortly after the judgment is paid" (§ 667.7, subd. (f)), the section provides (1) that the judgment shall specify, inter alia, the dollar amount of the individual payments, the interval between payments and the period of time over which the payments shall be made...