Lois Grunow Memorial Clinic v. Davis

• Decision Date: 22 March 1937
• Docket Number: Civil 3736
• Citation: 66 P.2d 238,49 Ariz. 277
• Parties: LOIS GRUNOW MEMORIAL CLINIC, a Corporation, Appellant, v. DAVID M. DAVIS, Appellee
• Court: Arizona Supreme Court

66 P.2d 238

49 Ariz. 277

LOIS GRUNOW MEMORIAL CLINIC, a Corporation, Appellant, v. DAVID M. DAVIS, Appellee

Civil No. 3736

Supreme Court of Arizona

March 22, 1937

APPEAL from a judgment of the Superior Court of the County of Maricopa. J. C. Niles, Judge. Judgment reversed.

Mr. H S. McCluskey, Messrs. Baker & Whitney and Mr. Lawrence L Howe, for Appellant.

Messrs Moore & Shimmel, for Appellee.

OPINION

LOCKWOOD, J.

This is an appeal by Lois Grunow Memorial Clinic, a corporation, hereinafter called defendant, from a judgment in favor of David M. Davis, hereinafter called plaintiff. The complaint sets up, in substance, the following cause of action: Plaintiff, a practicing physician, was asked by defendant to move with his family from Baltimore, Maryland, to Phoenix, Arizona, and to become a member of the medical staff of defendant. In consideration thereof and of the service to be rendered by plaintiff in connection with the defendant, the latter, together with W. O. Sweek and W. C. Grunow individually, guaranteed that they would pay to plaintiff such sum as his professional income during the year 1931 fell short of $12,000. It was further alleged that plaintiff accepted said offer and did remove to Phoenix and carry out his terms of the agreement aforesaid, and that his professional income during the year 1931 fell short of the guaranteed sum by $2,655.62; that demand had been made for the payment of such deficiency, but that it had been refused. The case was tried to the court sitting without a jury, and judgment was rendered in favor of plaintiff for the sum sued for, with interest, as against the defendant corporation only, whereupon the latter has appealed to this court.

There are some eleven assignments of error, but we think the case may be determined upon a consideration of the first and second conclusions of law filed by the trial court, which read as follows:

"1. That in his negotiations, in person and by correspondence, with plaintiff, defendant William O. Sweek acted as the agent of defendant Lois Grunow Memorial Clinic, a corporation, by express authorization of the resolution of July 8, 1930, and by implication from all the surrounding facts and circumstances.

"2. That the letters and telegrams comprising Plaintiff's Exhibits A to H, inclusive, and K, and Defendant's Exhibit 1 in evidence, constituted a contract by and between plaintiff and defendant Lois Grunow Memorial Clinic, a corporation, by the terms of which plaintiff agreed on or about January 1, 1931, to move from Balitimore to Phoenix and become a member of the staff of said Clinic, and defendant Lois Grunow Memorial Clinic, a corporation, agreed, in consideration of plaintiff's move and his services to be rendered to and in connection with said clinic, to pay plaintiff $12,000.00 per year, or such part thereof as should exceed plaintiff's professional income."

Most of the facts shown by the evidence are not in serious dispute, but since the findings of the trial court in many respects are not of ultimate facts but merely refer to various portions of the evidence appearing in the record, we state the facts as shown by such record in consecutive form and more fully than shown by the findings, accepting the latter of course where there may be any dispute in the evidence as to such ultimate facts. So stated, the factual situation presented by the record is as follows.

At some time prior to July 8, 1930, Dr. William O. Sweek, then and now one of the leading surgeons of Phoenix, Arizona, conceived the idea that it would be in the interest of the practice of medicine in Phoenix if certain physicians, specialists in their branches of the profession, would associate themselves in a voluntary organization, commonly called a "clinic," whereby they might be of mutual advice and assistance to each other and to any patients which any of the members of the clinic might serve. William C. Grunow, the other individual defendant, was a wealthy business man whose interests were centered in Chicago, but who spent part of his winters in the Salt River Valley. Dr. Sweek brought the question of the establishment of a clinic of the nature above described to the attention of Mr. Grunow, and the latter approved highly of the idea. The matter was discussed with a number of practicing physicians in Phoenix, and Mr. Grunow agreed, in substance, that he would cause a corporation to be organized and furnish it the funds to erect a suitable building, properly equipped, wherein the doctors who were to be members of the voluntary association of the type above described, and which we shall hereafter refer to as the clinic as distinct from the corporation, might have their offices, paying therefor a suitable rental. In pursuance of this idea, the defendant was organized as a corporation on the 17th of April, 1930; the incorporators being Dr. Sweek and Mr. Grunow. The powers given it were very broad in their details, but it was clearly apparent from its charter that it was not organized for profit. The entire control of the corporation was originally in the hands of the two incorporators, and no additional members might be added without their consent. As a matter of fact, during all the times during which it is claimed the cause of action arose these two incorporators were the only members of the corporation defendant, and its only officers and directors. Shortly after the incorporation, the board of directors adopted the following resolution:

"Resolved: That Director W. O. Sweek be and is hereby authorized to enter into agreements, contracts, or leases on behalf of the corporation with practitioners of the medical profession for space in the Lois Grunow Memorial Clinic, said agreements, contracts, or leases may be for indefinite periods or for a term of years, and may contain a clause for cancellation for good cause shown."

So far as the records show, this was the only act of the board authorizing any person to act as agent of the corporation.

In order to carry out the organization of the clinic along the lines which had been discussed, Dr. Sweek corresponded with a number of the leading medical organizations of the United States to find out if they knew of specialists in the various branches of medicine who would like to come to Phoenix and join the clinic. Among those whom he contacted was plaintiff, then a member of the staff of Johns Hopkins University, who was a specialist in the department of urology. Between July 30 and October 29, 1930, various letters and telegrams passed between Dr. Sweek and plaintiff. In Dr. Sweek's letter of August 4th to Dr. Davis, he replied very fully to many questions asked by Dr. Davis in his letter of July 30th, and in September Dr. Davis made a personal trip to Phoenix to make a thorough investigation into the situation. After his return to Baltimore, he received a telegram from Dr. Sweek, urging that he make up his mind as to whether he would join the clinic. On October 13th, Dr. Davis sent the following telegram to Dr. Sweek: "Accept with conditions please do not announce yet letter explains."

The letters referred to in the telegram contained the following conditions:

"I have however decided to go to Phoenix, making only two conditions which I hope and believe will be acceptable. I have been moved to this decision by the prospects at Phoenix, which I consider good, by the excellent facilities which will be available at the Grunow Memorial, by the desirable associations which I believe will be found there and by the climatic advantages of which I wish my family to have the benefit.

"In going so far, however, I have a natural desire to insure myself and my family as far as possible against any untoward combination of circumstances. I hope therefore that it will be possible for the Clinic to guarantee me $12,000.00 a year for two years. This sum seems appropriate, as it will enable me to live and meet the heavy expenses of moving, and yet is not so large as to remove any of the incentive to hard work. In addition I hope that the Clinic would be willing in case of necessity and during these first two years, to assist me by loans in financing the purchase of particularly expensive instruments. It is quite possible that this would never be necessary.

"Should the above conditions be acceptable, I desire to throw myself at once heartily and enthusiastically into every line of effort which will in any way further the work of the Clinic."

The specific condition on which this suit is based is as follows: "I hope therefore that it will be possible for the Clinic to guarantee me $12,000.00 a year for two years." On October 17th, Dr. Sweek replied to this letter saying, in part, as follows:

"In regard to the guarantee of the $12,000.00 a year, that is really a stumbling block, not because we haven't sufficient funds, and not because I personally would not be willing to guarantee it out of my own private income and split with you the profits that go over $10,000.00 -- I think I could make $10,000.00 or $15,000.00 for myself in the next two years -- but I will have to consult with Mr. McCluskey the attorney for the corporation and find out whether I can enter into such an agreement.

"I am under the impression that by reason of our state law here and the charter under which the institution operates, that I would have to pay you a straight salary for these two years and turn over to the corporation all that you earn above that fee. This is a tax exempt institution operating without profit, and from which no one can derive a profit. We can pay salaries and can enter into other contracts, but I would hesitate to put in writing such a guarantee without consulting Mr. McCluskey who is away and will not be back until Monday or...