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Sarokhan v. Fair Lawn Memorial Hospital Inc.

Decided: March 26, 1964.

JOHN SAROKHAN, PLAINTIFF-RESPONDENT,
v.
FAIR LAWN MEMORIAL HOSPITAL, INC., A CORPORATION OF THE STATE OF NEW JERSEY, SAM GIAMONCO AND NICHOLAS DEVITO, DEFENDANTS-APPELLANTS



Goldmann, Kilkenny and Collester. The opinion of the court was delivered by Kilkenny, J.A.D.

Kilkenny

Pursuant to leave granted under R.R. 2:2-3(a), defendants appeal from an interlocutory order of the Chancery Division, restraining them pendente lite from terminating plaintiff's services as medical director and director of surgery of defendant hospital, from interfering with his rendition of such services, and from doing certain other acts related thereto, as more particularly set forth in the order under review.

Defendant corporation operates for profit a private 63-bed hospital in Fair Lawn, New Jersey. The individual defendants are directors and officers thereof and also of the holding company which owns the land and building, wherein defendant hospital operates as a lessee, at a rental of $14,000 a month. Plaintiff is a doctor and surgeon. He is not a stockholder, director, or officer of and has no financial investment in defendant hospital corporation, or in the holding company.

On April 19, 1962 plaintiff entered into a written agreement with defendant hospital, under the terms of which he was appointed medical director and director of surgery of the hospital for a term of ten years. No salary is specified for these services. The agreement recites that it "may not be revoked or altered by The Hospital during that period" and that plaintiff is bound to the performance of the duties undertaken by him for the ten-year term of the contract. However, in a succeeding paragraph, the agreement provides that, notwithstanding any other provision of the contract, "the parties agree that in the event that two-thirds or more of the stock of The Hospital corporation is sold, that then and in that event The Hospital may, at its option and within thirty days of that event, terminate this contract," subject to plaintiff's

right to be retained as a consultant for the remainder of the term of the contract at $10,000 per annum, together with the privilege to conduct his private practice at the hospital as theretofore.

In its preamble, the agreement recognizes the need of a person "knowledgeable in the medical arts and in the processes of medical administration" in the initial stage of organizing and establishing the hospital and that plaintiff has the knowledge and experience to provide such services. His duties included the organizing of a general surgical and medical staff, pathology services and all other services pertaining to the care and treatment of patients, to the end that the hospital would be eligible for accreditation and approval by the American Hospital Association and our State Department of Institutions and Agencies. He was not responsible for the organization of nursing services but, as medical director, was given authority to review the competence and capability of any member of the nursing staff. He was required to use his best efforts to invite to membership on the staff competent medical personnel in all fields in which the hospital was capable of providing service.

The hospital agreed that, within the limits of monetary appropriations authorized for the purpose, plaintiff would have the sole authority to select professional personnel for a period of two years from the date of the acceptance of the first inpatient by the hospital. (The first inpatient was accepted on November 19, 1962). Upon expiration of the two-year period, the selection of professional personnel was to be made in pursuance of bylaws to be established. Plaintiff was given authority to discharge or terminate the appointment of persons on the professional staffs, if he retained such authority at the time of making the appointment. If plaintiff was unable after a reasonable time to provide a full professional staff, then the hospital could choose suitable persons to fill the vacancies. Plaintiff was required, with the advice of members of the various staffs, to prepare all necessary bylaws for the proper administration of the hospital, but the hospital's

board of directors had the final authority to approve the bylaws and any amendments thereto.

Recognizing the problems in connection with the initial organization and establishment of proper administration, the hospital agreed that the terms of the contract would not be altered or amended by any bylaw, regulation or directive thereafter established or promulgated by it, but that any such future directive, resolution or bylaw would be consistent with the terms of the contract. Plaintiff was made chairman of the medical executive committee, or other comparable committee established by the bylaws.

By the terms of the agreement, plaintiff undertook to devote to the hospital "sufficient time and effort" to accomplish the initial organization of the medical and surgical services, and thereafter a "sufficient amount of time" to the proper administration of those services. He was not barred from maintaining staff membership on the staff of any other hospital "or from continuing his conduct of the private practice of medicine" at defendant hospital. In connection with his private practice, plaintiff was left free to determine and receive fees for his professional services.

Until September 1963 plaintiff performed his duties without interference by the board of directors. On October 8, 1963 defendant Nicholas DeVito, president of the hospital, wrote a letter to plaintiff inquiring why two men were not appointed assistant medical directors. A reply was received from plaintiff's counsel, stating that plaintiff alone could appoint members to the professional staff and that under no circumstances was he to be considered the agent of the board of directors, or of the president of the hospital. Defendants say that this incident triggered the controversy which led to plaintiff's filing his three-count complaint herein on December 9, 1963. The second and third counts seek money damages as sole remedy for alleged tortious conduct and do not ...


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