TALLEY v. NORTHERN SAN DIEGO COUNTY HOSPITAL DIST

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District Court of Appeal, Fourth District, California.

TALLEY et al. v. NORTHERN SAN DIEGO COUNTY HOSPITAL DIST.*

Civ. 4289.

Decided: July 25, 1952

David S. Casey, San Diego, for appellants. Gray, Cary, Ames & Frye, Ward W. Waddell, Jr., San Diego, for respondent.

A demurrer to the original complaint was sustained with leave to amend. The amended complaint follows the general allegations of the original complaint and alleges that respondent Northern San Diego County Hospital District, a corporation (hereinafter referred to as the District) was and now is a corporation organized, existing and operating under sec. 32000 et seq. of the Health and Safety Code, and under the name of Palomar Memorial Hospital; that it accepts paying patients; that appellant Naomi S. Talley was under the care of defendant Dr. L. E. Adams; that under his advice she entered the hospital as a paying patient on August 7, 1950; that while she was reduced to a state of unconsciousness by the use of an anaesthetic, respondent District, its named defendant agents, nurses, employees, and doctors, while acting within the scope of their authority, negligently allowed her body and legs to become burned by placing and allowing hot water bottles or hot material to remain against those parts; that as a result of defendants' negligence she had to submit to painful skin grafts proximately resulting in her permanent injury, damaging her to the extent of $75,000. Additional claim is made for special damages. There is no allegation that the district was operating in a proprietary capacity or that it accepted only paying patients. Respondent District appeared separately, and by general demurrer alleged that the amended complaint did not state a cause of action against it. It was sustained without leave to amend. Judgment in its favor followed, from which judgment plaintiffs appealed. Defendant Dr. Adams and the remaining defendants answered and denied generally the allegations of the complaint.

Apparently, it was and is respondent's position, as well as the court's conclusion, that respondent District is an agency of the State, exercising governmental functions under its laws, and not acting in a proprietary capacity, and as such is immune from a suit for personal injuries. Such cases as Calkins v. Newton, 36 Cal.App.2d 262, 97 P.2d 523; Latham v. Santa, Clara County Hospital, 104 Cal.App.2d 336, 231 P.2d 513; and Davie v. Board of Regents, etc., 66 Cal.App. 693, 227 P. 243, are cited in support of the argument.

It is appellants' position that an organization acting under a grant of power from the State Legislature is not, per se, a State agency; that it cannot be presumed that its activities are solely governmental acts entitling it to immunity; that whenever any governmental entity acts in a proprietary field, it is liable for its acts of negligence; that the operation of a local hospital district falls within that proprietary field and is clearly distinguishable from a county hospital organized and operating under sec. 200 et seq. of the Welfare and Institutions Code. In support of these contentions they cite Morrison v. Smith Bros., Inc., 211 Cal. 36, 293 P. 53; Yolo v. Modesto Irrigation District, 216 Cal. 274, 13 P.2d 908; Muses v. Housing Authority, 83 Cal.App.2d 489, 189 P.2d 305; People v. Superior Court, 29 Cal.2d 754, 178 P.2d 1; Beard v. City & County of San Francisco, 79 Cal.App.2d 753, 180 P.2d 744; Henderson v. Twin Falls County, 56 Idaho 124, 50 P.2d 597, 101 A.L.R. 1151; Goodall v. Brite, 11 Cal.App.2d 540, 54 P.2d 510; and Calkins v. Newton, 36 Cal.App.2d 262, 97 P.2d 523.

Apparently this question has not been decided insofar as it applies to a hospital district organized under sec. 32000 et seq., Health and Safety Code. The general rule that a county, acting in a governmental capacity, cannot be sued, originated in the fiction that the King can do no wrong. It arose from the practical necessity of enabling the State to exercise its governmental functions unhampered by the demands on the exchequer resulting from the carelessness or mistakes of its officers or agents in the discharge of their official duties. This doctrine has been deemed to prevail except where it has been departed from by constitutional and statutory laws, as interpreted and applied by the courts. The doctrine of sovereign immunity is that the State may not be sued without its consent. See, People v. Superior Court, 29 Cal.2d 754, 756, 178 P.2d 1, as to the history and discussion of this general question and the authorities cited.

In Green v. State, 73 Cal. 29, 11 P. 602, 14 P. 610 it was held that when the state authorizes itself to be sued, and there is no statutory or constitutional provision fixing a different liability, its measure of responsibility is to be determined by the same rule which determines the liability of one of its own citizens. But the court pointed out that the application of that measure was not to be deemed an admission of liability where the state was acting in a sovereign capacity, that is, where it was engaged in a public work for the common good, or as it might be said, in a governmental activity, as distinguished from a nonsovereign or commercial enterprise. In that case a levee commission was empowered to construct the channel of the American River for the protection of the City of Sacramento, under a legislative act which authorized the plaintiffs and others to institute actions against the State for damages occasioned by the construction. In that action it was held that the work involved was public work for the common good; that the language of the act giving consent to be sued clearly reserved any legal defense; and that a good defense then existed.

The primary question here is whether, in the performance of the duties under consideration, the District was exercising a business function in it proprietary capacity, as distinguished from the discharge of a governmental duty. In the case of People v. Superior Court, supra, after discussing Denning v. State, 123 Cal. 316, 55 P. 1000; Chapman v. State, 104 Cal. 690, 38 P. 457; and Melvin v. State, 121 Cal. 16, 53 P. 416, the court distinguished between governmental and nongovernmental functions and said [29 Cal.2d 754, 178 P.2d 5]:

‘* * * the decisions in this state do not foreclose, but seem to favor the proposition that sovereign liability exists for negligence in the state operation of an industrial or business enterprise’; and concluded ‘that the business of transportation for hire is usually undertaken by private individuals or corporations and not by government, support the conclusion that the operation of the railroad is not in the exercise of a governmental function, but constitutes a commercial or business enterprise in the negligent operation of which the state may be held liable.’ In that case it was alleged that the state was ‘acting in a proprietary capacity’.

In Griffin v. County of Colusa, 44 Cal.App.2d 915, 113 P.2d 270, it was held that the operation of a county hospital is a governmental activity and the county is not liable for negligence of employees towards patients therein; that counties are state agencies and in the absence of specific statute imposing liability upon them they are no more liable than the state itself.

In Sherbourne v. Yuba County, 21 Cal. 113, it was held that private corporations and municipal corporations may be liable for the acts of their employees of whom they have the appointment and supervision, and when the duty to be performed is for the benefit of the corporation.

13 Cal.Jur. p. 772, sec. 9, states that ‘a charitable institution, whether public or private, is not liable to persons under its care for injuries caused by the negligence of its servants in administering the charity, if the institution has used due care in the selection of the servants.’ It was said that this rule was based upon the implied contract by which a person who accepts the benefits of a charity exempts his benefactor from liability. ‘But where the corporation is conducted for profit, whether private or municipal, it is liable for the misfeasance and nonfeasance of its officers and employees within the scope of their employment’; that ‘where a patient, upon regaining conciousness after administration of an anaesthetic, discovers injuries of which he was free at the time of taking the anaesthetic, the doctrine of res ipsa loquitur applies so that proof of the injury carries with it the presumption of negligence. This is the rule whether the liability of the hospital is ascribed to the carelessness of experienced nurses or to negligence in selecting nurses who are not competent.’

In Paso Robles, etc., Hospital District v. Negley, 29 Cal.2d 203, 173 P.2d 813, it was held that the legislature may authorize a public corporation to build and operate a hospital as a business and such hospital serves a ‘public use’; that the tax imposed for such use is a tax for a public purpose; and that a levy made for building and maintaining the hospital in that district is a general tax on all the property in the district and not a special assessment.

In Beard v. City and County of San Francisco, 79 Cal.App.2d 753, 180 P.2d 744, an action against a consolidated city and county, it was held that an allegation in the complaint that a child was received as a paying patent in a city and county hospital, was a sufficient statement that the hospital was not operated for indigent patients alone under the general state law.

In Goodall v. Brite, 11 Cal.App.2d 540, 54 P.2d 510, this court held that a county hospital may admit patients who may pay the cost or a proportionate share of the cost (without profit) when they are not financially able to secure hospitalization in a private institution; that under such circumstances the care of such patient promotes the public health and welfare of the community in which he lives; that the promotion of the public health and general welfare of the citizens of the county falls within the police powers granted for counties within sec. 11, Article XI of the California Constitution. But the admission to and treatment in a county hospital of patients who, either themselves or through legally responsible relatives, can provide themselves with equally efficient care and treatment in private institutions does not promote the health and general welfare of the citizens of the county and is not a proper exercise of the police power of that county, but results in the use of public money for private purposes.

Calkins v. Newton, 36 Cal.App.2d 262, 97 P.2d 523, held that where there is no private general hospital in the vicinity of a county general hospital, it is proper for the county to furnish service, insofar as its facilities permit, to persons who may otherwise be unable to get hospitalization without what may be fatal inconvenience or delay, even though they are able to pay full rates, and while a county is not authorized to operate such a hospital for profit, such persons should be compelled to pay as much of the actual cost of hospitalization as they can; and the admission of such persons to a county hospital under such circumstances and upon such terms promotes the health and general welfare of the citizens and is within the police powers of the board of supervisors, and such powers, so exercised, are governmental in their character.

Can it here be said that the District was conducted for the sole purpose of making a profit, was not charitable in character, was not organized for the promotion of the public health and general welfare of the citizens of the District, and did not possess the attributes essentially necessary to bring it within the classification of a governmental function? We think not.

In Davie v. Board of Regents, etc., 66 Cal.App. 693, 227 P. 243, 245, it was held that the maintenance by the Board of Regents of the University of California of an infirmary for the sole purpose of safeguarding and protecting the health of the student body constitutes the exercise of a duty involving governmental functions in the highest degree and, it being in no sense an organization for profit, the imposition upon each student of a small infirmary fee did not convert such governmental function into a proprietary one so as to render the Board of Regents liable in damages for the negligent acts of its agents and servants in the operation of the infirmary. In that case it was contended by appellant, as it is here, that the corporation had a dual character—governmental and also proprietary and private—and while acting in the latter capacity its liabilities arising out of either contract or tort are the same as those of natural persons or private corporations, and he endeavored to invoke the application in his favor of the rule established by the decisions of this state, that a municipal corporation is liable for torts of its agents committed in the performance of activities or functions purely private or proprietary in their nature. There, respondent contended that the pleadings show, on their face, that the infirmary was maintained as a part of the University of California, operated only in connection with the educational functions thereof, and this being so, it was not liable for the torts of its agents committed in connection therewith. It was further contended there, as here, as a matter of law, that the distinction in actions of this character between governmental and proprietary functions is limited in its application to municipal corporations, and does not extend to state agencies, such as counties, school districts, road districts, and The Regents of the University of California, and that this distinction between torts committed in the course of the exercise of public and governmental functions on the one hand, and of private and proprietary activities on the other, has never been applied to any but municipal corporations; for which reason it claims that the rule involved has no application to the instant case. After discussing the first proposition the court said:

‘In its governmental or public character the corporation is made by the state one of its instruments or the local depositary of certain limited and prescribed political powers, to be exercised for the public good. But in its proprietary or private character the theory is that the powers are supposed not to be conferred primarily or chiefly from considerations connected with the government of the state at large, but rather for the private advantage of the compact community which is incorporated as a distinct legal personality or corporate individual; and as to such powers and to property acquired thereunder and contracts made with reference thereto, the corporation is to be regarded as private in character.’

The court then discusses the question of the maintenance of a hospital by a municipality and concluded:

‘* * * that in the absence of statutory provision to the contrary a hospital created and existing for purely governmental purposes and under the control of the municipality or state is not liable for injuries to a patient caused by the negligence or misconduct of its employees, although a statute, as here, may declare it to be a corporation which may sue and be sued. The maintenance of such hospitals is held to be for the public welfare and the advancement of public health, and in the operation thereof municipalities or the state exercise governmental or political functions.’ (Italics ours.)

The court then cites with approval Browder v. City of Henderson, 182 Ky. 771, 207 S.W. 479 where it is said that the power or even the duty on the part of a municipal corporation to make provision for the public health and for the care of the sick appertains to it in its governmental or public capacity, and that no element of safety is more important than those pertaining to public health; and accordingly it is there held that where a city establishes a hospital it is not responsible to persons injured by reason of the misconduct of its agents or employees. It further stated that a review of the authorities of other states generally showed they held that the maintenance of a hospital by a municipality is a governmental function, and that in the conduct thereof the municipality is not liable for the tortious acts of its employees. It then held that from the complaint in that action it affirmatively appeared that the infirmary in question was conducted by the defendant corporation for the exclusive use of the students, and that it was so conducted by it for the sole purpose of safeguarding and protecting the health of the student body; that this being so, it in no sense was an organization for profit, and the imposition of the small fee did not convert this governmental function into a proprietary one; and that ‘the promotion and welfare of the students in this respect must be held to be the exercise of a duty involving governmental functions in the highest degree.’

In all the principal California cases relied upon by appellant, except the Beard case, the activity in question was inherently of a business and commercial nature. They involved situations in which the state, through its agency, was encroaching upon fields that have always and traditionally been regarded as commercial in nature. The operation of a hospital it not necessarily such a field. An irrigation district, insofar as it conducts only the business ordinarily proper to an irrigation district, even though it charges for the water, is a state agency and operates and owns its property in a governmental capacity. It is true that if it engages in the business as a public utility, particularly if it does so outside of its own boundaries and in competition with other public utilities, it does so in a proprietary capacity and becomes, as to matters relating to such business, liable for personal injuries resulting from torts of its employees. Yolo v. Modesto Irrigation District, 216 Cal. 274, 13 P.2d 908.

Since 1947, county hospitals have been specifically authorized by statute to charge fees. Welfare and Institutions, Code sec. 203.5. It has been held that the imposition of a charge for service is not inconsistent with the exercise of a governmental function and that this does not, in itself, constitute any engagement in the hospital business on a proprietary basis. Latham v. Santa Clara County Hospital, 104 Cal.App.2d 336, 231 P.2d 513. Hence, any argument from the mere fact that local hospital districts are also authorized to charge fees is not necessarily controlling. By the terms of the act, added by Stats. of 1945, chap. 932, provision is made for the formation of a ‘local hospital district’. The real purpose of the act was to make provision in a territory of a county or portion of the state where other hospital facilities were not accessible to the people in the district, for adequate hospitalization for the general welfare and health of the people in that vicinity. The method of formation of the district and election of officers to conduct its affairs are similar to that of an irrigation district, and it has been uniformly held that an irrigation district is a governmental agency, within the meaning of the rule that such agencies are not liable for tort, so long as it operates only as an irrigation district. Nissen v. Cordua Irrigation District, 204 Cal. 542, 269 P. 171; Whiteman v. Anderson-Cottonwood Irr. Dist., 60 Cal.App. 234, 212 P. 706.

Section 32125 of the Health and Safety Code provides that the hospital shall be operated according to the best interests of the ‘public health’ and the directors ‘may prescribe the terms upon which patients may be admitted thereto’ and shall fix such rates, insofar as possible, as will permit the hospital to be operated upon a self-supporting basis and may borrow money in anticipation of the estimated tax revenue and other income.

The operation of a public hospital, by a district authorized and organized by state law, involving as it does the public health, necessarily and traditionally stands on a different footing from activities that have been traditionally commercial in their nature. It is apparent that the statute does not authorize or contemplate operation at a profit but to the contrary directs that the district shall operate it in the best interests of the public health, merely attempting to keep its losses as low as it can. The primary purpose of the statute is obviously to fulfill the function of protecting the health of the citizens of California by furnishing hospital services in areas where hospital facilities are for some reason not adequate, especially in those rural districts where hospitals cannot be maintained without extraordinary governmental support. It is apparent that this act was a ‘welfare act’. There is no indication that the formation of such a district was for the purpose of competing with industry or labor or with any other hospital. We think it is clear from the statutes regulating local hospital districts that it was intended that such hospitals be operated only in a governmental capacity.

Judgment affirmed.

GRIFFIN, Justice.

BARNARD, P. J., and MUSSELL, J., concur.