Hamilton v. Corvallis General Hospital Ass'n

• Citation: 30 P.2d 9,146 Or. 168
• Parties: HAMILTON v. CORVALLIS GENERAL HOSPITAL ASS'N.
• Decision Date: 27 February 1934
• Court: Supreme Court of Oregon

30 P.2d 9

146 Or. 168

HAMILTON v. CORVALLIS GENERAL HOSPITAL ASS'N.

Supreme Court of Oregon

February 27, 1934

Department 2.

Appeal from Circuit Court, Benton County; Earl C. Latourette, Judge.

Action by Mrs. A. R. Hamilton against the Corvallis General Hospital Association to recover damages for injuries sustained through bodily burns occasioned by the use of an electrical heating pad in the hospital of the defendant corporation. Judgment for plaintiff, and defendant appeals.

Affirmed.

Frank S. Senn, of Portland (Lester G. Oehler, of Corvallis, and Senn & Recken, of Portland, on the brief), for appellant.

Mark V Weatherford, of Albany (Weatherford & Wyatt, of Albany, on the brief), for respondent.

BAILEY Justice.

The two assignments of error urged on this appeal are based on the refusal of the court to grant defendant's motions for a nonsuit and for a directed verdict. The reasons presented in support of those motions were: (1) That the defendant corporation is a charitable institution organized without stockholders and operated without profit to any one, and therefore not subject to damages for the negligence of its employees; (2) that there was insufficient evidence of negligence to entitle the case to go to the jury; and (3) that the treatment of plaintiff which occasioned the injury was by direction and under the instruction of her physician.

We shall first consider the question of whether or not the defendant corporation was, at the time of the injury, a charitable institution. Before referring to the pleadings and the evidence in the case, it may be observed that the articles of incorporation are not conclusive as to the character of the business conducted by the corporation. This latter subject will be discussed in detail later in the opinion.

The complaint alleges that on March 20, 1932, the date of the injury complained of, and for a long time prior thereto, the defendant, Corvallis General Hospital Association, was a corporation organized pursuant to the laws of the state of Oregon. To the complaint is attached and made a part thereof a copy of defendant's articles of incorporation. It is alleged that at all times since its organization the defendant has operated its hospital for hire and not otherwise; that at no time had it conducted its business for charity or for charitable purposes; that at no time had the defendant received or held "any bonds or thing of value in trust, and does not hold, or has it received the same for trust purposes"; that the hospital has been operated by defendant under a system by which all patients received therein "were compelled to pay the usual charges and fees for services rendered by said hospital that are charged by other hospitals over the state for like services, and at no time, and on no ocassion, has the defendant received in said hospital, or cared for at said hospital, any patient for charitable purposes and without cost to such patient"; that at all times since its organization the said hospital has been operated for profit that said defendant has "never acted or functioned in the governmental and charitable purposes as permitted by its articles of incorporation"; that the whole of defendant's business for a period of years last past has been "devoted to and exercised by the defendant in its proprietary capacity for commercial purposes and for profit"; and that the defendant has exacted charges "for caring for its patients more than fifty per cent in excess of the actual cost thereof to defendant" and has used the profit received from conducting its said hospital business "for its own private profit and gain."

The complaint further alleges that the sole and only purpose the defendant had in organizing as a charitable association was to evade the payment of taxes; that the defendant has made profits in excess of $10,000 a year; that the defendant in its proprietary capacity and "out of the profits of its commercial and proprietary business has created a fund for the protection of those injured" through its negligence, which fund is in excess of the amount claimed by plaintiff in this case; and that a recovery by plaintiff of the full amount prayed for in her complaint would not in any manner interfere with "the administration of any trust, affect any trust fund" or levy upon "any property, money or thing of value owned or held by defendant for charitable purposes or for trust purposes."

The defendant is then charged, in the complaint, with negligently and carelessly providing and maintaining in its hospital an improperly constructed electrical device or pad to be used by its employees in applying heat in certain instances to patients being cared for in defendant's hospital; and that this electrical device or pad was by defendant's employees negligently and carelessly applied to and allowed to remain in contact with plaintiff's body, thereby causing the injuries of which she now complains.

In its answer the defendant admits that it is a corporation, that a true copy of its articles of incorporation is attached to the complaint, and that it had rendered its bill for services to the plaintiff. Denial is made of the other allegations of the complaint. As an affirmative defense the defendant alleges that it had been incorporated and operated as a charitable organization, that it has never paid any dividends or profits to any one, and that all its earnings have been devoted to charitable purposes.

The reply denies all the allegations in defendant's further answer and defense, and for a further and separate reply avers that the defendant should be estopped, because of certain facts, from alleging and proving that it is a charitable corporation.

The defendant's articles of incorporation, which are made a part of the complaint and are admitted by the defendant, recite that the Corvallis General Hospital Association was organized under the laws of this state providing for the formation of benevolent, charitable, and other eleemosynary societies, that the objects, purposes, and pursuits of the corporation are to construct and maintain, establish, and operate benevolent and charitable hospitals and other institutions for the care of the sick, distressed, and injured, to hold and manage real property, and to receive gifts and bequests of personal property and devises of real property, and that its income "will be from gifts, devises, bequests, subscriptions, charges made for services and care to be performed for patients and others in and about the conduct of the business of the association."

Article 4 of the by-laws of the defendant corporation is as follows: "This association is not formed for pecuniary profit or private gain, and there shall be no stock nor stockholders. Its objects shall be carried out without profit to said association or to the members thereof. All revenue shall be devoted to the carrying out of the general purposes of the association, being the operation of benevolent and charitable hospitals and other institutions for the care of the sick, distressed and injured, together with nurses' homes in connection therewith and to aid those in physical distress, including the payment of current expenses and principal and interest on its indebtedness, if any, and to relief of the poor and needy, indigent patients of the community shall be treated free of charge."

The evidence in the case is to the effect that prior to February 26, 1926, there had been organized under the laws of the state of Oregon, a corporation known as Corvallis General Hospital, which was operating a hospital at Corvallis, Ore. It is conceded that the Corvallis General Hospital was organized for profit. The defendant, Corvallis General Hospital Association, is the successor in interest of the Corvallis General Hospital and acquired all the assets of said former corporation. The transfer of the property to the new corporation occurred on or about February 26, 1926, at which time the original corporation had a bonded indebtedness of about $40,000, the exact amount of which the witnesses did not know but which was some $32,000 or $33,000 in 1930, and outstanding stock of the par value of $49,620. After this transfer, the original corporation was dissolved.

At the time the property of the original corporation was conveyed to its successor, the latter assumed the bonded indebtedness, and on February 26, 1926, made, executed, and delivered its note in the sum of $49,620 to the original corporation. This note was due on May 10, 1926, and bore interest at the rate of 6 per cent. per annum after maturity. It contained a provision that it had been executed pursuant to an agreement between the original corporation and its successor for the sale and purchase of the assets of the original corporation, and that the note might "be exchanged at the option of said Corvallis General Hospital association for its second mortgage income bonds pursuant to the agreement referred to."

Thereafter second mortgage bonds were issued by the defendant corporation in the amount of said note and were delivered to a trustee to be held for the benefit of the stockholders of the original corporation.

The incorporators and subsequent trustees of the defendant corporation were stockholders of the original corporation, and all or practically all of the trustees of the defendant corporation up to the time of the trial appear to have been stockholders in the first corporation.

During the year 1929 or 1930 the total income of the defendant corporation from the operation of its hospital amounted to between $45,000 and $47,000. Since that time the gross income has decreased annually approximately 12 1/2 per cent. from that of the preceding year; the gross income for 1932 having been $33,000. The...