Hatch v. Emery

• Citation: 1 Ariz.App. 142,400 P.2d 349
• Decision Date: 26 March 1965
• Docket Number: CA-CIV
• Parties: Bill P. HATCH, D.O., Geoffrey Lawrence, D. O., James Chapman, D.O., D. A. Stiles, D. O., L. A. Nowlin, D.O., H. C. Purtzer, D.O., and C. H. Crotty, D.O., Appellants, v. Claude EMERY, Ivan J. Mashek, Nelson F. Huie, James R. Merritt, Dick Smith, Allan R. Perry, L. A. Tanner, Robert P. Van Denburgh, and Edward Mathis, Appellees. * 135.
• Court: Court of Appeals of Arizona

Page 349

400 P.2d 349

1 Ariz.App. 142

Bill P. HATCH, D.O., Geoffrey Lawrence, D. O., James Chapman, D.O., D. A. Stiles, D. O., L. A. Nowlin, D.O., H. C. Purtzer, D.O., and C. H. Crotty, D.O., Appellants, v. Claude EMERY, Ivan J. Mashek, Nelson F. Huie, James R. Merritt, Dick Smith, Allan R. Perry, L. A. Tanner, Robert P. Van Denburgh, and Edward Mathis, Appellees. ^*

1 CA-CIV 35.

Court of Appeals of Arizona.

March 26, 1965.

Rehearing Denied May 4, 1965.

Review Denied June 2, 1965.

Cox & Hedberg, by James J. Cox, Jr., Phoenix, for appellants.

Carl W. Divelbiss, Phoenix, for appellees.

CAMERON, Judge.

This is an appeal from an order of the court below, dismissing plaintiff-appellant's petition for Writ of Mandamus. In January of 1952, articles of incorporation creating Phoenix General Hospital, as a non-profit corporation, were filed and approved by the Arizona Corporation Commission. The membership of the corporation at that time was composed solely of members of the osteopathic profession. In 1955, the membership was expanded to include a board of directors or trustees, composed of lay members. The term 'Director' or 'Trustee' being interchangeable in this opinion. As a result, in September of 1959, the membership of the corporation consisted of sixty members who were osteopathic doctors and members of the active staff, and ten lay members who composed the board of directors of Phoenix General Hospital, Inc. In the interim, a tract of land was purchased, and a hospital was constructed at the corner of 19th Avenue and Indian School Road in Phoenix, Arizona. This hospital was open for use in the month of December, 1958, and is still in operation.

The lay members of the corporation served only on the board of directors, and were not members of the active staff of the hospital. On or about 13 September, 1959, some of the members of the active staff who were also members of the corporation, requested that the secretary of the corporation call a membership meeting to be held in the evening of 29 September, 1959, to amend the articles of incorporation.

At this time, the provisions for membership in this corporation, as set out in Article 13 of the by-laws as amended in 1955, read as follows:

'Members of the Corporation, as herein used, shall include any and all members of the Active Staff in addition to such other persons as may be approved by the Board of Trustees upon recommendation of any member or members of the Active Staff and of the Board of Trustees. Any person other than a member of the Active Staff admitted to membership shall be issued a certificate of membership upon such terms and conditions as may be established by the board of trustees.'

The board of directors or trustees met at noon on 29 September, 1959, and pursuant to this by-law and upon the recommendation of three members of the active staff, approved and issued certificates of membership in the corporation to one hundred and fifty-nine people consisting of friends, relatives and associates of the members of the board of directors or trustees. During the afternoon of 29 September, 1959, proxies were obtained from the one hundred and fifty-nine people who had been admitted to membership at the noon meeting. The proxies were signed and given to one individual. At the evening meeting, the amendment to the articles of incorporation proposed by members of the active staff was defeated by a vote of one hundred and seventy-four to thirty-five. Thirty-five members of the active staff voted for the amendment, while fifteen members of the corporation, including the ten lay directors, voted against the amendment, together with the one hundred and fifty-nine proxies.

Thereupon, a member of the board of directors moved that the following resolution be adopted:

'RESOLVED, that the Articles of Incorporation of this corporation be amended by adding two additional paragraphs to Article VIII of the Articles of Incorporation, as follows:

"These Articles of Incorporation may be amended by a two-thirds (2/3) majority vote of all the members of the Board of Trustees at any regular or special meeting of such Board, of which each Board Member shall have had at least three (3) days written notice of said meeting, said notice setting forth the proposed alteration, amendment or repeal; provided, however, that no such notice need be given to any member of the Board of Trustees who shall in writing waive the same.

"The Board of Trustees shall have the sole and exclusive power to adopt, amend and rescind By-laws; to fill vacancies occurring in the Board of Trustees, whether caused by resignation, death or otherwise."

Again the vote was one hundred seventy-four to thirty-five, this time in favor of the substitute amendment. The amendment thus passed and was filed with the Corporation Commission on 1 October, 1959. The plaintiffs, members of the active staff as well as members of the corporation, bring this action to set aside the amendment as allegedly passed and to recognize and substitute the one allegedly defeated.

The lower court held for the defendants, and plaintiffs, after many motions and procedural matters, bring this appeal from the decision of the lower court, quashing the Writ of Mandamus.

Both the by-laws and the articles of incorporation are silent concerning the use of proxies. The evidence is sufficient to indicate that proxies had been used in the past and therefore could be adopted by custom. Rossing v. State Bank, 181 Iowa 1013, 165 N.W. 254 (1917); In re Tidewater Coal Exchange, 2 Cir., 280 F. 638 at 643 (1922).

There is no evidence that the new members, admitted at the noon meeting on 29 September, 1959, did anything other than sign proxies for the use and benefit of the board of directors or trustees. There is no evidence to indicate that any of the new members of the corporation attended the meeting on the evening of 29 September, and the evidence indicates that the only reason for their membership was to provide proxies to be voted at that meeting for and on behalf of the board of directors or trustees. Other than signing the proxies they undertook no responsibilities in membership and had nothing to do with said hospital after signing said proxies.

The Arizona Revised Statutes, under 'Mandamus', states as follows:

'A writ of mandamus may be issued by the supreme or superior court to any person, inferior tribunal, corporation or board, though the governor or other state officer is a member thereof, on the verified complaint of ...