Birt v. St. Mary Mercy Hospital of Gary, Inc.

• Decision Date: 06 December 1977
• Docket Number: No. 3-1074A171,3-1074A171
• Citation: 175 Ind.App. 32,370 N.E.2d 379
• Parties: Eugene BIRT, Plaintiff-Appellant, v. ST. MARY MERCY HOSPITAL OF GARY, INC., J. Sala, M. D., W. Sala, M. D., W. Nowlin, M. D., T. Lorenty, M. D., F. Monroe, M. D., A. Williams, M. D., M. Valencia, M. D., Zell F. Spellman, Executrix of the Estate of Frank W. Spellman, M. D., R. Purcell, M. D., and Mercy Medical Associates, Inc., Defendants-Appellees.
• Court: Indiana Appellate Court

Page 379

370 N.E.2d 379

175 Ind.App. 32

Eugene BIRT, Plaintiff-Appellant, v. ST. MARY MERCY HOSPITAL OF GARY, INC., J. Sala, M. D., W Sala, M. D., W. Nowlin, M. D., T. Lorenty, M. D., F. Monroe M. D., A. Williams, M. D., M. Valencia, M. D., Zell F Spellman, Executrix of the Estate of Frank W. Spellman, M D., R. Purcell, M. D., and Mercy Medical Associates, Inc., Defendants-Appellees.

No. 3-1074A171.

Court of Appeals of Indiana, Third District.

Dec. 6, 1977.

John Kappos, Hawk P. C. Kautz, Daniel C. Kuzman, Merrillville, for plaintiff-appellant.

James V. Donadio, Margaret C. Attridge, Ice, Miller, Donadio & Ryan, Indianapolis, Patrick J. Galvin, W. Patrick Downes, Galvin, Galvin & Leeney, Hammond, T. Clifford Fleming, Lucas, Clifford, Kane & Holcomb, Merrillville, for defendants-appellees.

GARRARD, Judge.

Plaintiff, Eugene Birt, appeals from a summary judgment granted in favor of individual non-treating defendant physicians on Birt's claim for malpractice. These individuals were associated with the treating physician in a medical professional corporation organized under the Indiana Medical Professional Corporation Act (hereafter: IMPCA), IC 1971, 23-1-14-1 et seq. (Burns Code Ed.). We affirm.

Prior to March 17, 1972, Dr. M. Valencia (Valencia) and Doctors J. Sala, W. Sala, W. Nowlin, R. Purcell, A. Williams, F. Monroe, T. Lorenty, and F. Spellman (Appellee Physicians) agreed to operate and staff the emergency room of St. Mary Mercy Hospital of Gary (Hospital). On March 17, 1972, Valencia and Appellee Physicians, all being duly licensed in Indiana, executed articles of incorporation under the IMPCA for Mercy Medical Associates, Inc. (Associates). The doctors became stockholders, directors and employees of Associates. On April 6, 1972, the Secretary of State certified and approved Associates' articles of incorporation. On April 9, 1972, Valencia and Appellee Physicians began staffing Hospital's emergency room. All emergency room physician fees were collected by the hospital and paid to Associates. Associates paid its physician employees an hourly wage.

On May 13, 1972, Birt was treated at the emergency room by Valencia, the scheduled attending physician. As of that date Associates had not received from the State Board of Medical Registration and Examination ¹ (Board) a certificate of registration as required by IC 1971, 23-1-14-8. ²

Subsequently, Birt filed an action alleging malpractice by Valencia. The hospital, Associates, Valencia, and Appellee Physicians were all named defendants. Appellee Physicians subsequently moved for summary judgment. The trial court found the following facts to be uncontested in addition to those summarized above: that none of the Appellee Physicians were present at the hospital, nor on duty, nor scheduled to be on duty when Birt was treated; that none of the Appellee Physicians advised Valencia on the treatment or diagnosis of Birt; that Appellee Physicians exercised no control over and had no right to direct the treatment of Birt; that none of the Appellee Physicians stood in the relationship of physician-patient to Birt at any relevant time; and that Appellee Physicians' sole connection with Valencia was through Associates.

The trial court concluded as a matter of law that on the date of Birt's treatment Associates had achieved de jure incorporation under the IMPCA and that under that act, a stockholder, director, officer, or employee of a medical professional corporation is not personally liable for the tort of a physician employee merely because of corporate association. On appeal, Birt challenges both conclusions.

Birt argues that the certificate of registration required by IC 1971, 23-1-14-8 is a sine qua non for corporate existence under the IMPCA. Associates lacked such a certification when Birt was treated. Therefore, it is said, the liability of Appellee Physicians is not determined by the IMPCA. We disagree.

IC 1971, 23-1-14-5 provides:

"Applicability of the Indiana General Corporation Act. Part I and II (23-1-1-1 23-1-10-6) and sections 70 and 71 (23-1-12-1, 23-1-12-2) of the Indiana General Corporation Act, Acts 1959 (1929), chapter 215, as amended and supplemented, shall be applicable to professional corporations, including their organization and they shall enjoy the powers and privileges and be subject to the duties, restrictions and liabilities of other corporations, except where inconsistent with the provisions and purpose of this act (23-1-14-1 23-1-14-21). This act shall take precedence in the event of any conflict with provisions of the Indiana General Corporation Act." (emphasis added)

IC 1971, 23-1-3-4 (Burns Code Ed.) of the General Corporation Act states:

"Effect of certificate of incorporation. Upon the issuance of the certificate of incorporation by the secretary of state, the corporate existence shall begin, all subscriptions for shares theretofore received shall be deemed accepted by the corporation and the subscribers for such shares, or their assigns, shall be deemed to be shareholders of the corporation.

The certificate of incorporation issued by the secretary of state shall be conclusive evidence of the fact that the corporation has been incorporated; but proceedings may be instituted by the state to dissolve, wind up and terminate a corporation which should not have been formed under this act or which has begun business without a substantial compliance with the conditions prescribed by this act as precedent to beginning business." (emphasis added)

Accordingly, absent a conflict with the provisions or purposes of the IMPCA, IC 1971, 23-1-3-4 would declare Associates to have begun corporate existence on April 6, 1972 when its articles of incorporation were certified and approved by the Secretary of State. Birt, however, alleges that such a conflict exists between IC 1971, 23-1-3-4 and IC 1971, 23-1-14-8 which provides:

"Certificate of registration. No corporation incorporated under this act (23-1-14-1 23-1-14-21) shall open, operate or maintain an establishment for any of the purposes set forth in section 6 (23-1-14-6) of this act without a certificate of registration from the regulating board. Application for such registration shall be made to said board in writing and shall contain the name and address of the corporation and such other information as may be required by the board. Upon receipt of such application, the board shall make an investigation of the corporation. If the board finds that the incorporators, officers, directors and shareholders are each licensed pursuant to the Medical Practice Act (25-22-1-1 et seq.; Burns' §§ 63-1301 et seq.) and if no disciplinary action is pending before the board against any of them, and if it appears that the corporation will be conducted in compliance with the law and regulations of the board, the board shall issue, upon payment of a registration fee of $10.00, a certificate of registration which shall remain effective until January 1st following the date of such registration." (emphasis added)

We do not believe the statutory language supports the construction that compliance with its provisions is a condition precedent to corporate existence. It refers to a "corporation incorporated under this act" and to its "incorporators, officers, directors and shareholders." Thus, the statute contemplates an existing corporate entity. Moreover, the context of the statute is to require Board certification before any medical professional corporation "shall open, operate, or maintain an establishment" to render medical service. This strongly indicates that certification is a condition precedent for the doing of business instead of a condition to valid incorporation. Such a construction is supported by the decision in Western Machine Works et al. v. Edwards Machine and Tool Corp. et al. (1945), 223 Ind. 655, 63 N.E.2d 535. In that case, our Supreme Court construed a section of the General Corporation Act which provided in part:

"A corporation formed under this act shall not transact any business or incur any indebtedness, except such as shall be incidental to its organization or to obtaining subscriptions to or payment for shares of its capital stock, until; * * * (b) The amount of paid-in capital with which it will begin business, as stated in the articles of incorporation, has been fully paid in." 223 Ind. 655, 662, 63 N.E.2d 535, 538.

Relying in part upon the predecessor to IC 1971, 23-1-3-4 and, in part, upon the statutory language referring to an existing corporate entity, the Court held the requirement of paid-in capital to be a condition for doing business rather than for valid incorporation.

The purposes of the IMPCA as stated in IC 1971, 23-1-14-2, do not require that we reject this plain meaning of IC 1971, 23-1-14-8 in favor of the construction advocated by Birt. It might be said that his interpretation would marginally increase the protection of the public from frauds and incompetents seeking to operate through a medical professional corporation. However, the primary purpose of the act, as discussed, infra, is not the protection of the public from the illicit medical practitioner; that purpose is served by other statutes and administrative rules governing the practice of medicine. The statutory scheme is merely to preserve the effectiveness of those controls. Accordingly, we find the trial court did not err in determining that Associates was a medical professional corporation when Birt was treated.

We now turn to the issue of whether the trial court correctly found Appellee Physicians not to be personally liable as a matter of law for Valencia's malpractice.

As noted above, the General Corporation Act controls medical professional corporations absent a conflict with the purposes or provisions of the IMPCA. IC 1971, 23-1-14-5. Thus, the act discloses legislative intent that the common law which supplements statutory corporations law shall also apply to medical professional...