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District Court of Appeal, First District, Division 1, California.


Civ. 10746

Decided: February 08, 1939

Weinmann, Quayle & Berry, of Oakland, for appellant. H. Raymond Hall and Edward J. Silver, both of Oakland, for respondent.

Plaintiff, over seventy years of age, through her daughter sought and was granted care and treatment in a ward of defendant hospital at the agreed regular rate of $4 a day. Several days after her entry plaintiff fell out of bed. One of plaintiff's attending physicians instructed defendant to equip the bed with a side board. This order was obeyed except upon one occasion, about three and one-half weeks thereafter, when plaintiff again fell from the bed and fractured her right hip. Because of the latter injury plaintiff incurred expenses in the sum of $1,101.45. This action was brought and judgment given for total damages of $3,000. In support of the argument for reversal of the judgment appellant contends that the charity doctrine, which is an integral part of the jurisprudence of this state, exempts the corporation hospital from liability, and that the judgment therefore is without evidentiary support.

Appellant erected its first hospital on borrowed money, paid off the indebtedness from its income, acquired a new site, and is reducing the present indebtedness. The corporation hospital has received no endowments or donations and its source of income is from paying patients. It has no stock or stockholders, and its officers serve without remuneration; it accepts charity, semi-charity and full-pay patients; it maintains a free clinic for children and expectant mothers, and a free school for training nurses. It gives dole at its doors, free meals to indigent applicants, and assistance to poor families outside of the hospital. It becomes necessary, therefore, to determine whether, under all the circumstances of this case, it may be designated as a charitable institution and entitled to exemption from liability for the negligence of its servants.

In some states the charity doctrine is not recognized. In other states legislation has endeavored to define the exemption. In a few states charitable institutions are exempt in every case. The early authorities are discussed in Basabo v. Salvation Army, 35 R.I. 22, 85 A. 120, 42 L.R.A., N.S., 1144. Using the Basabo decision as a basis, California has declared “that where one accepts the benefit of a public or of a private charity, he exempts by implied contract the benefactor from [implied] liability for the negligence of the servants in administering the charity”. Stewart v. California Medical etc. Ass'n, 178 Cal. 418, 422, 176 P. 46, 48. The purpose of the corporation, and its manner of operating, determine its charitable character. Hallinan v. Prindle, 220 Cal. 46, 29 P.2d 202; Stewart v. California Medical etc. Ass'n, supra. The burden of proof that the institution is not operated for profit, but has all the distinctive earmarks and is in fact a charitable organization, is upon the party alleging this affirmative defense. Lewis v. Y.M.C.A. Ass'n, 206 Cal. 115, 273 P. 580; England v. Hospital of Good Samaritan, 22 Cal.App.2d 226, 70 P.2d 692.

The reason for the exemption rule in cases of this classification is public policy. If the organization and the method of operation are strictly nonprofitable, and the fundamental purpose is charity, the public is best served by the rule that the proceeds from donations and trust funds that aim to aid the sick and afflicted, who would be unable otherwise to obtain the advanced scientific care and treatment, is distinctly an expedient for the betterment of the welfare of the public. In a case where a charitable hospital is operated at a loss, and the deficit is met by resort to the proceeds of trust funds and donations, the law, in the interest of protecting the many as against the few, assumes that entry into such an institution is a waiver by the patient of rights for damages resulting from injuries occurring from the negligence of its servants when due care has been used in the selection of the servants. If the hospital is not dependent upon gifts, etc., for its usual upkeep, the waiver does not apply unless the patient is the recipient of charitable benefits, in which instance it would be against sound morals to sue the benefactor. There is a distinction between torts of charitable institutions committed in the direct administration of the charity, and torts committed in deriving funds wherewith to operate the charity. In the latter instance the hospital corporation is liable. Gamble v. Vanderbilt University, 138 Tenn. 616, 200 S.W. 510, L.R.A.1916C, 875; Baker v. Board of Trustees of the Leland Stanford University, 133 Cal.App. 243, 23 P.2d 1071; Stewart v. California Medical etc. Ass'n, supra.

Appellant relies upon the cases of Hallinan v. Prindle, supra; Armstrong v. Wallace, 8 Cal.App.2d 429, 47 P.2d 740; and Shane v. Hospital of the Good Samaritan, 2 Cal.App.2d 334, 37 P.2d 1066. In the last case the decision rested upon the conclusion that the hospital was of a charitable nature. In his brief in that case appellant admitted the charitable character of the hospital. In the Hallinan case the hospital was completely endowed, and any deficit was met by private contribution. In the opinion in Armstrong v. Wallace, supra, many facts are recited common to the instant case, but the hospital in the Armstrong case was a gift, and the income from paying patients did not meet the operating expenses of the hospital. The deficit was overcome by public drives for funds, and private bequests for educational purposes, including the training of nurses. In the present case, the original hospital, and likewise the new hospital, were acquired through a loan, and maintained from profits in the operation of the pay-patient department. The corporation is not endowed and creates its own funds for charity; hence there is no possibility of a trust fund, donated as charity for many of the sick and afflicted, being diverted or depleted by an award of damages to one person.

It is true that profits may not always be measured by an excess of receipts over disbursements, but if it appears that the excess can reasonably take care of interest on capital invested, and ordinary depreciation, and still a substantial fund remains, it is immaterial whether the fund is appropriated by the institution for further improvements, outside investments, dividends, or is set aside for charity. In this case the corporation hospital is a good business enterprise. The articles of incorporation provide that “Pecuniary profit is not and never shall be the object of this corporation”, but in the paragraph outlining the purpose of the corporation, no mention is made of charity. The trial court found “that said hospital was operated by said defendant for profit even though the general purposes of said defendant may have been charitable”. There is ample evidence to sustain this finding. The primary purpose of the organization was profit. From that profit, charity was dispensed. The charity was dependent upon and sufficiently distinct to indicate that first in importance was profit.

Individuals dealing with a corporation impliedly take notice of the charter provisions of its management, and purpose, and therefore the knowledge of plaintiff as to the conduct of defendant corporation is not controlling. In a case wherein a question arises as to whether the patient has entered a non-charitable or a strictly charitable hospital, or one wherein a business is conducted from which funds are derived and the profits thereof used for charitable purposes, evidence of knowledge of the patient of the character of the institution may be admissible in determining whether or not the patient accepted the advantages of charity from a benefactor. England v. Hospital of the Good Samaritan, supra. The evidence shows that when plaintiff was admitted to the hospital she was ignorant of any claim that it was exempt for its negligence upon the theory that it was a charitable institution. Plaintiff was charged full rates for care, pharmaceutical supplies and all services rendered. Except in this one instance of negligence, she received so far as the record discloses all the advantages and all the benefits given to any patient who might have paid full rates in any hospital not claiming charitable exemption. There was no conduct manifested by plaintiff that she understood she would be without redress if injuries occurred due to negligence of employees of the hospital. Civ.Code, § 1621. Considering all of the facts of the case there does not appear to be any justification for exempting the defendant from the liability incurred by other hospitals conducted for profit.

The trial court found that plaintiff had incurred special damages in the sum of $520 for the expense of a housekeeper, at the rate of $65 per month for eight months. The evidence shows that the housekeeper was actually in attendance for a period of nine months and one week. Attention is called by appellant to the evidence of respondent's attending physician, who asserted that her convalescence period probably would continue three, four or five months. We are not prepared to modify the judgment upon the attending physician's testimony to which he added, “that is all speculative”, in the face of positive evidence.

The judgment is affirmed.

WARD, Justice.

We concur: TYLER, P.J.; KNIGHT, J.

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