Fleming Hospital v. Williams
| Citation | 169 S.W.2d 241 |
| Decision Date | 24 February 1943 |
| Docket Number | No. 9315.,9315. |
| Parties | FLEMING HOSPITAL, INC. et al. v. WILLIAMS et al. |
| Court | Texas Court of Appeals |
Appeal from District Court, Travis County, 126th District; Roy C. Archer, Judge.
Action by the Fleming Hospital, Inc., and another against Claude A. Williams and others, constituting the Texas Unemployment Compensation Commission, to enjoin collection of contributions or taxes and penalties under the Unemployment Compensation Act, in which the state intervened and filed a cross-action for such contributions or taxes and penalties. Judgment for defendants and intervenor, and plaintiffs appeal.
Affirmed.
J. V. Fleming, of Tyler, for appellants.
Gerald C. Mann, Atty. Gen., Morris Hodges and Lee Shoptaw, Asst. Attys. Gen., and W. H. Farmer, of Austin, for appellees.
Appellants, Fleming Hospital, Inc., and Dr. J. V. Fleming, sued appellees, Claude A. Williams, C. R. Miller, and R. A. McKinley, as members constituting the Texas Unemployment Compensation Commission, seeking to enjoin appellees from collecting certain contributions or taxes and penalties claimed to be due under the Texas Unemployment Compensation Act. Arts. 5221b — 1 to 5221b — 24, Vernon's Ann.Civ. Sts. Appellees requested the intervention of the State, and by way of cross-action the State through its Attorney General sued for the contributions or taxes and penalties alleged to be due by appellants, aggregating $110.76.
The issues before the Commission and before the trial court on the statutory appeal from the Commission's action in the premises, and here, are two, as follows:
1. Whether appellant Fleming Hospital, Inc., is a charitable institution and exempt from paying the contributions or taxes demanded of it under the provisions of Art. 5221b — 17, Sec. (g) (5) (G), Vernon's Ann. Civ.St., which read: "(G) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation."
2. Whether appellants, Fleming Hospital, Inc., and Dr. J. V. Fleming, can be considered as one employment unit under the provisions of Art. 5221b — 17, Sec. (f) (4), which reads: "(4) Any employing unit which, together with one or more other employing units, is owned or controlled (by legally enforceable means or otherwise) directly or indirectly by the same interest, or which owns or controls one or more other employing units (by legally enforceable means or otherwise), and which, if treated as a single unit with such other employing unit, would be an employer under Paragraph (1) of this subsection".
In 1938 Dr. J. V. Fleming erected a building to house a hospital, a clinic, and his offices, and as owner so operated same until February 1, 1940. He employed more than eight employees and paid the contributions or taxes due under the Texas Unemployment Compensation Act. On February 1, 1940, he, his wife, Frances Fleming, and his father, J. V. Fleming, Sr., organized the Fleming Hospital, Inc., the three constituting the Board of Directors of the corporation. It has no capital stock, but issues certificates to its members, which determine their voting rights; each director having one vote. Its charter provides that: "Said corporation is not organized and its business shall not be conducted for profit, but it may charge for its services to enable it to carry on said business, the payment of salaries of employees, taxes, rental for necessary hospital buildings and acquiring hospital supplies, etc., necessarily used in the maintenance and operation of a hospital."
On February 1, 1940, the Board of Directors elected J. V. Fleming, Sr., president of the corporation, and passed a resolution entitled "Superintendent and Operation," which reads: "After further discussion of the operation of said Hospital, it was moved, seconded, duly passed by the Board of Directors, that Dr. Joe V. Fleming was elected Superintendent of said Fleming Hospital, Inc. with power and authority in behalf of said Corporation to employ and discharge any and all employees of said Corporation, and also to fix their compensation or salary, and to establish all rules and regulations of the operation of said Hospital, which may be necessary; and fix the charges for its services to the public, which may patronize it, subject to any further action of the Board of Directors or the majority vote of the holders of the Member Certificates."
On the same day, February 1, 1940, the Board of Directors approved and Dr. J. V. Fleming executed a lease of his hospital, buildings, and grounds to said Fleming Hospital, Inc., for $200 per month, payable out of the income of the corporation after the payment of its expenses of operation; the corporation also agreeing to pay out of its income all taxes and insurance on the property. The lease reserved to Dr. Fleming the portion of the building theretofore used by him as his offices and clinic, which he continued to operate individually. The income of the corporation for the remainder of the year 1940, and the year 1941, was not sufficient to meet all operating expenses and pay all of the $200 monthly rental, but the amount it did pay as rental was not shown. The lease contract obligated Dr. Fleming to pay three named employees, one of whom was elected secretary of the corporation, and who kept books for both Dr. Fleming and the corporation. Dr. Fleming continued to carry on his private practice and clinic in the portion of the building reserved to him, and on the books he assigned three of the employees to himself and six or more of them to the corporation, the combined number so employed being at all times sufficient to bring them under the Unemployment Compensation Act. After this transfer of employees Dr. Fleming sought of the Unemployment Compensation Commission a release of his liability individually for the contributions or taxes prescribed by the statutes and as theretofore paid by him. Except as to these mentioned matters Dr. Fleming, individually and as superintendent, continued to operate the hospital in the same manner as he had operated it privately.
No patient was admitted strictly as a charity patient, although none was turned down because of inability to pay for hospital services. All patients received in the hospital were the patients of Dr. Fleming although he testified that the corporate charter provided that any doctor could use the hospital by paying the prescribed amount fixed for the services rendered. The books show that all patients were charged for the hospital services rendered them; and as to pay, part pay, and nonpay patients for the period involved, the books show as follows:
"1940 1941
"Paid Patients .......... 200 257
Part Paying Patients ... 22 43
Non-Paying Patients .... 17 14"
These unpaid accounts are still sought to be collected.
No money dividend or profit as such is paid from the income of the hospital corporation to any of its certificate holders; but the facts above detailed show that Dr. J. V. Fleming and his wife who constitute two-thirds of the voting directors of the corporation, receive private benefit and pay from the income of the corporation. In the first place, they receive under the rental contract the sum of $200 per month plus all taxes and insurance as rental for their private property; which is apparently community property, but if not, then the rental received therefrom is community property. Under the lease contract and the resolution appointing Dr. Fleming as superintendent of the hospital corporation, he is required to charge patients enough hospital fees to pay out of such income the rentals, taxes and insurance on such private property.
In the second place, Dr. Fleming testified that the setup whereby he reserved a part of the hospital building for his private practice, the use of the hospital,...
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