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Joseph v. Passaic Hospital Association

Decided: April 28, 1958.

MORRIS JOSEPH, PLAINTIFF-APPELLANT,
v.
PASSAIC HOSPITAL ASSOCIATION, A CORPORATION OF THE STATE OF NEW JERSEY, ET AL., DEFENDANTS-RESPONDENTS. MORRIS JOSEPH, PLAINTIFF-APPELLANT, V. JOHN C. BARBOUR, ET AL., DEFENDANTS-RESPONDENTS



On certified appeal to the Appellate Division of the Superior Court from judgments dismissing the complaints entered in consolidated actions in the Chancery and Law Divisions of the Superior Court.

For affirmance -- Law Action -- Chief Justice Weintraub, and Justices Heher, Burling, Jacobs, Francis and Proctor. For reversal -- None. For reversal -- Chancery Action -- Chief Justice Weintraub, and Justices Heher, Burling, Jacobs, Francis and Proctor. For affirmance -- None. The opinion of the court was delivered by Heher, J.

Heher

[26 NJ Page 560] We certified, sua sponte, plaintiff's pending appeal in the Appellate Division of the Superior Court from judgments severally dismissing his complaints in two

separate proceedings for an injunction and "general and compensatory damages."

The first action was brought June 5, 1954 in the Chancery Division of the Superior Court to enjoin the Passaic Hospital Association, a body corporate, its Board of Governors and executive officers, and the Medical Staff of the Passaic General Hospital, alleged to be an "unincorporated association, associated with the Passaic General Hospital," and the Hospital's director, all of whom were joined as defendants, from "interfering with the right of plaintiff," a licensed physician and surgeon, "to have private patients admitted into the Passaic General Hospital," a " quasi -public institution" under the control and operation of the defendant corporation, "and to treat his private patients" there, and to reinstate plaintiff "as a member of [its] Emeritus Staff" and "to such status as he may have enjoyed prior to the [adverse] action of the Board of Governors on February 15, 1954," of which more hereafter.

The second action was begun August 6, 1954 in the Law Division of the Superior Court against the individual members of the Board of Governors, the Medical Board and the Medical Staff and employees of the Hospital Association, to recover damages for conspiracy "to destroy plaintiff's profession as a medical doctor or surgeon and his character and reputation for ethical conduct, honesty and integrity in the practice of medicine and surgery," and "to make and instigate false charges against him for improper and illegal practices and for alleged violations of codes of ethics of * * * medical organizations" and the Hospital's rules and regulations, to the end of "bringing about his expulsion from [the] hospital" and thereby to still his criticism of members of its Medical Staff "for fee-splitting, ghost surgery, unnecessary operations and other unapproved and unethical medical practices condemned by [specified] medical organizations," and thus to deprive him, as an "Emeritus member" of the Hospital's Medical Staff, of the "opportunity of practicing surgery" and "to operate on patients in [the] hospital and practice his said profession and specialty."

The several answers to these actions pleaded, by way of separate defenses, that plaintiff "served as a member of the [Hospital] Staff at the will of the Board of Governors"; it was "completely within the discretion" of the Board of Governors "as to whether or not the plaintiff should be appointed either to its Medical Staff or to the Emeritus Staff"; and in refusing "reappointment" to plaintiff the Board "acted in good faith, within its discretion, and in the best interests of the administration of the Hospital"; also that the Hospital is not a " quasi -public institution," but rather "a privately operated and conducted hospital."

In the Chancery proceeding, a summary judgment for defendants on the pleadings, 35 N.J. Super. 450 (Ch. Div. 1955), was reversed by the Appellate Division, 38 N.J. Super. 284 (App. Div. 1955). The holding there was, Clapp, S.J.A.D., that "the allegations of the complaint setting forth a failure to give plaintiff the hearing due him under the by-laws -- taken in conjunction with the allegations charging certain defendants with malice in connection with his failure of reappointment or removal -- clearly make out a cause of action," -- a cause of action "proprietary in nature," resting "on an allegedly malicious impairment of a property right -- the right of the plaintiff to earn a livelihood in his profession and to secure the economic advantages accorded to him pursuant to the by-laws." And it was there observed that the parties had not dealt with the question whether the remedy "lies through a mandatory prerogative writ proceeding for reinstatement," or whether there is a remedy "through an injunction," but the point was not pursued. We denied certification. 20 N.J. 535 (1956).

Upon the remand, the actions were consolidated and tried in the Law Division of the Superior Court, without a jury by consent.

At the close of the plaintiff's case, the Chancery action was dismissed on the ground that plaintiff's "membership on the [Hospital's] medical staff terminated, under [the last] appointment, December 31st, 1953," and he "had no right to be reappointed"; "[h]is reappointment rested within

the sound discretion of the Board of Governors"; under the Association's Constitution, "the final responsibility for reappointment [rests] with the Board of Governors," and if the By-laws of the Medical Staff be deemed applicable, they "also say that the action of the Board of Governors * * * is final, whether or not the man is given a hearing": and assuming plaintiff's desire for a hearing by the Board of Governors, communicated to the Board, the refusal of the Board "to reappoint him to the medical staff was final," and at most the failure to accord him a hearing was "a mere irregularity." Here, it was pointed out, as a circumstance to the same end, that plaintiff "submitted his case" to the Hospital's Joint Committee, and "took part in its deliberations without objection, although he voiced his desire to be heard by the Board of Governors."

And there was a further holding that the court "cannot interfere in the internal management of a corporation, except in cases of fraud, bad faith, breach of trust, or gross mismanagement, or * * * where the acts of the Board of Governors would be ultra vires "; and there was none such here, simply a "formal irregularity in the execution of the [Board's] powers." Reference was made to the action of the Medical Board, December 15, 1953, recommending that plaintiff "be temporarily removed from the [Hospital] Emeritus Staff, subject to action by the Board of Governors," also to the "report of the Audit Committee which found that [plaintiff] had failed to follow the rules and regulations of the surgical practice in the hospital," and the "letter from the Medical Society" as to certain complaints made by plaintiff to the "Medical Society about the charts which were the subject of" the Audit Committee's report, then before the Medical Board, all of which had been laid before the Board of Governors: and it was found that "those reports before the Board of Governors" sufficed to support the Board's refusal to "reappoint" plaintiff. It was said that, even assuming "some evidence of bad faith," where the "failure to reappoint is capable of two constructions, one which is honest and in good faith," it is to be presumed

that "the action of reappointment was based upon the reports before the Board of Governors, and that it was done in good faith."

The judge concluded that the exclusive remedy to enforce plaintiff's asserted "membership" or "right to reappointment" was by a proceeding in lieu of mandamus, and such relief was barred by R.R. 4:88-15.

And the action at law for damages was dismissed as involving "an act * * * done in good faith and for valid reasons and proper motives" which stands until "declared illegal by a proceeding in lieu of a prerogative writ," and is not subject to collateral attack, and withal sustained by the presumption of good faith unrebutted by evidence of "malice, conspiracy or other wrongful acts" by the Board of Governors, the Joint Committee, or the Medical Board or the individual defendants, although two of the latter were guilty of slander, which "is not [the] wrong which is the subject of this suit."

I.

In the holding that under the Hospital Association's Constitution and the By-laws adopted by the Medical Staff, the action of the Board of Governors in refusing reappointment to an emeritus member of the Hospital's Medical Staff "is final, whether or not the man is given a hearing," the trial judge fell into error.

The Hospital Association was incorporated in 1892 under L. 1877, c. 103. Its Constitution declares its object to be "the establishment, support and management of an institution for the care, cure and nurture of sick and injured persons of any creed, nationality or color," and the establishment, maintenance and operation of "a training school for nurses." To serve these purposes, it operates the Passaic General Hospital, supported by patients' fees and charitable donations, including an annual payment of $18,000 by the City of Passaic for the care and treatment of indigent residents.

The Association's Constitution, Article III, section 1, provides for a voting membership comprising persons who make an annual payment of $25 or more, and a non-voting associate membership for ...


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