Conners v. Northeast Hospital Corp.Conners v. Northeast Hospital Corp.
Lead Opinion
On Aрril 2, 1997, while walking from a parking lot into the building where she worked, Janet Conners slipped on an accumulation of ice and snow and suffered a serious injury to her leg. She brought an action for damages against Northeast Hospital Corporation (Northeast), which owned and maintained the parking lot as part of a complex of buildings on its hospital campus. She also sued a Northeast employee — the director of its plant operations — and two Northeast subcontractors. The case was tried before a jury in the Superior Court; they found no liability against the employee and the subcontractors, found Northeast negligent, and awarded Conners damages against Northeast in the amount of $183,000. The trial judge allowed Northeast’s motion to amend the judgment to $20,000, pursuant to G. L. c. 231, § 85K, which limits the liability of charitable corporations to that amount.
Conners appealed, challenging the imposition of the charitable cap on damages she had been awarded against Northeast, as well as certain of the judge’s jury instructions concerning the subcontractors’ negligence. We granted Conners’s application for direct appellate review. We now affirm.
1. Background. We first summarize the evidence pertaining to Conners’s attack on Northeast’s limitation on liability. Northeast was incorporated in 1893 as Beverly Hospital Corporation under a precursor to G. L. c. 180, the statute governing charitable corporations. Sometime before 1997, Northeast underwent a corporate reorganization, and, by amendment in 1997, changed its name to “Northeast Hospital Corporation.” As stаted in its
As part of its assets, Northeast owns the Beverly Hospital campus, which consists of, among other things, the hospital, several parking lots, and a condominium complex, known as The Medical Building, housing various physicians’ practice groups. Northeast does not own The Medical Building itself, but owns the land beneath it, which is leаsed to the building’s condominium association. Northeast receives a “modest,” below market-rate, annual payment for that lease. Physicians who practice in The Medical Building are on the staff and have admitting privileges at the hospital.
As an acute care hospital, Northeast competes with several other area hospitals for its share of patients. Northeast’s chief financial officer, John O. Wilhelm, Jr., testified that to maintain its “financial viability,” the hospital undertook “to make it attractive for doctors to admit patients to the hospital.” To that end, the hospital sought “to foster good relations” with the physicians whose practice groups were located in The Medical Building condominium.
The plaintiff was an employee of one such physician practice group, and she was injured in the Northeast parking lot (B-2) located adjacent to The Medical Building. As provided by the terms of the lease between Northeast and the condominium association, the parking lot was available for parking by employees (such as the plaintiff) and patients of the physician practice groups, as well as employees, patients, and visitors to the hospital.
According to the testimony of Wilhelm, Northeast generated revenue from the treatment and care rendered to some of its
2. Applicability of G. L. c. 231, § 85K. Northeast has not appealed from the jury’s finding of liability against it. The sole issue with respect to the hospital is whether it was error for the judge to modify the judgment against it pursuant to G. L. c. 231, § 85K. Conners argues that the judge erred because Northeast failed to establish (1) that it was a “charity”; (2) that its snow removal activities were carried on “to accomplish directly” its
As we noted recently in Keene v. Brigham & Women’s Hosp., ante 223, 238-239 n.25 (2003), the Legislature enacted G. L. c. 231, § 85K, in the wake of Colby v. Carney Hosp.,
(a) Status as a charity. Conners first claims that, by 1997, Northeast no longer “functioned” as a charity “in any meaningful sense of the word,” but was a “commercial enterprise.” See Harlow v. Chin,
Conners ignores the fundamental distinction of purpose that separates charitable from for-profit corporations. “An institution will be classed as charitable if the dominant purpose of its work is for the public good and the work done for its members is but the means adopted for this purpose. But if the dominant purpose of its work is to benefit its members or a limited class of persons it will not be so classed, even though the public will derive an incidental benefit from such work.” Western Mass. Lifecare Corp. v. Assessors of Springfield,
A hospital, like any other corporation formed under G. L. c. 180, may nevertheless not qualify as a public charity where it
The size of an institution is irrelevant to a determination of charitable status, as is the source of its revenue. See Barrett v. Brooks Hosp., Inc., supra at 760, quoting Worcester v. New England Inst. & New England Sch. of Accounting, Inc.,
There is also no requirement that a hospital provide free care to retain its charitable status. See Barrett v. Brooks Hosp., Inc.,
Nor is Northeast’s charitable purposes negated because it is one of several entities, some of which are for profit, integrated into a single corporate structure. While Conners attacks the charitable status of Northeast because of the manner in which it has adapted to the new economic realities of delivering “care and treatment of the sick” in a rapidly evolving, expensive, and highly regulated environment, her real argument is that this court should significantly revise the concept of “charity” under § 85K, at least as it applies to hospitals. We recognize that there is a vigorous and ongoing debate provoked by the dramatically chаnging landscape of the health care industry regarding the charitable treatment of health care institutions.
(b) The limitation on liability. Conners’s statutory argument, that Northeast’s removal of snow from the parking lot did not “accomplish directly” its charitable purposes, G. L. c. 231, § 85K, is equally unavailing. Conners contends that the snow removal activities were undertaken pursuant to a “commercial lease,” and that the purpose of the lease was “to create patient revenue,” not to promote hеalth, the hospital’s charitable purpose. See id. at 239 (“a charitable corporation must be engaged in its charitable purpose to enjoy the benefit of the cap [on damages]”).
The revenue-generating aspects of the relationship between Northeast and the physicians’ practice groups do not detract from the charitable purposes of the activities. Use of the parking lot was not limited to employees or visitors of The Medical Building, but was available to anyone in need of mеdical attention at the hospital. See Enman v. Trustees of Boston Univ.,
Conners advances a further argument: even if Northeast is a charity that maintained the parking lot to advance its charitable purposes, Northeast may not benefit from the statutory cap because the tort wаs committed in the course of activities “primarily commercial in character even though carried on to obtain revenue to be used for charitable purposes.” G. L. c. 231, § 85K. Relying on Missett v. Cardinal Cushing High Sch.,
To determine whether the statutory limitation on liability applies in a given case, Conners elevates the “primarily commercial” analysis of § 85K’s second sentence to a separate test, independent of the “accomplished directly” analysis set forth in the first sentence. The two considerations denoted in the statute are not independent. Having determined, correctly, that the hospital’s activity challenged by Conners “accomplished directly” the charitable purposes of Northeast, it was not necessary for the judge to consider whether those activities were “primarily commercial in character.” We reach this conclusion by parsing and construing each phrase of § 85K so that each word is “given its ordinary meaning without overemphasizing its effect upon the other terms appearing in the statute, so that the enactment considered as a whole shall constitute a consistent and harmonious statutory provision capable of effеctuating the presumed intention of the Legislature.” Globe Newspaper Co. v. Commissioner of Educ., ante 124, 129 (2003), quoting Bolster v. Commissioner of Corps. & Taxation,
The first clause of the first sentence of § 85K abolishes charitable immunity, and is not at issue here. The second clause
The second sentence of § 85K (“primarily сommercial”) clarifies the Legislature’s intent in circumstances where the questioned activity of a charity is one that generates revenue: that sentence directs the fact finder to consider, among other things, whether the activity is a money-making enterprise merely designed to keep the charity afloat, in which case the limitation does not apply, or whether the revenue is generated by an activity accomplishing the purpose of the charity. See, e.g., Phipps v. Aptucxet Post #5988 V.F.W. Bldg. Ass’n,
We have already concluded, as did the judge, that the lease by Northeast of a portion of its grounds for use as a medical office building housing physicians on the hospital’s staff and with admitting privileges, and the attendant snow removal activities directly accomplishes Northeast’s charitable purposes. No further inquiry is required.
3. The jury instructions. We find no merit in Conners’s argument that the judge erred by not instructing the jury to consider, in evaluating the subcontractors’ duty of care and breach, whether they complied with the terms of their contracts with Northeast and, more generally, with the standard of care in the snow removal industry. On the issues of duty of care and breach, the judge instructed the jury that each of the subcontractors had “a duty to use reasonable care in the performance of his duties” and an obligation to perform the duties in a “diligent and workmanlike manner.” These instructions were legally adequate.
Judgment affirmed.
Notes
General Laws c. 231, § 85K, provides, in pertinent part: “It shall not constitute a defense to any cause of action based on tort brought against a corporation . . . that said corporation . . . is or at the time the cause of action arose was a charity; provided, that if the tort was committed in the course of any activity carried on to accomplish directly the charitable рurposes of such corporation . . . liability in any such cause of action shall not exceed the sum of twenty thousand dollars exclusive of interest and costs. Notwithstanding any other provision of this section, the liability of charitable corporations . . . shall not be subject to the limitations set forth in this section if the tort was committed in the course of activities primarily commercial in character even though carried on to obtain revenue to be used for charitable purposes.”
There was evidence that the parking lot was also used to park school buses overnight, but there is no evidence as to whether Northeast obtained any revenue from that use.
John O. Wilhelm, Jr., testified that “free care” is provided to indigent patients who are not insured and cannot pay for the cost of treatment, at a cost to Northeast of several million dollars each year. “Bad debt” describes the debt incurred by patients who do not initially claim indigency but who nevertheless do not pay for their treatment. According to Wilhelm, “most hospitals . . . believe that a signifiсant majority of bad debts is really free care,” because patients are “afraid” to inform a hospital at the time of admission that they are indigent “for their fear that [a hospital] won’t give them treatment.”
These activities were described in detail in Northeast Health System Inc.’s “1997 Community Benefits Report,” a report submitted with Northeast’s 1996 Federal tax return as an attachment to Form 990, covering the period beginning October 1, 1996, and ending September 30, 1997. Examples included: conducting educational programs and seminars; providing free and low-cost screening, outreach and support services to members of the public (including services specifically targeted at “underserved” populations); and implementing a “community health assessment” to identify the community’s health needs.
The debate has focused primarily on the validity of tax-exempt status for such organizations. See, e.g., Sackett, Conversion of Not-for-profit Health Care Providers: A Proposal for Federal Guidelines on Mandated Charitable Foundations, 10 Stan. L. & Pol’y Rev. 247 (1999) (proposing solutions to ease transition for health care organizations making transition from converting from nonprofit to for-profit entities); Comment, Integrated Delivery Systems — The “Promised Land” of Health Care: Obtaining a Federal Income Tax Exemption as a Nonprofit Organization under Section 501(c)(3) of the Internal Revenue Code, 20 U. Dayton L. Rev. 203 (1994) (discussing ways in which integrated health delivery systems can maintain charitable status for Federal tax exemption purposes); Developments in the Law —• Nonprofit Corporations, 105 Harv. L. Rev. 1578, 1629-1633 (1992) (discussing debate regarding propriety of tax exemption for health care institutions). See also O’Neill, Charitable Immunity: The Time to End Laissez-Faire Health Care in Massachusetts has Come, 82 Mass. L. Rev. 223, 231 (1997) (arguing statutory cap
The statutory language adopted by the Legislature, G. L. c. 231, § 85K, is all but identical to language contained in that case, see McKay v. Morgan Memorial Coop. Indus. & Stores, Inc.,
Conners also argues that the statutory cap violates her equal protection and substantive due process rights of the Massachusetts Declaration of Rights, as amended, and the Fourteenth Amendment to the United States Constitution, effectively asking us to overrule our decision in English v. New England Med. Ctr., Inc.,
Conners’s cause of action against the subcontractors undertaking the snow removal, as stated in her complaint, was based in tort, not contract. Moreover, although negligent performance of a contract may give rise to a tort action against a contractor for a third party lacking privity of contract, see Me
Concurrence Opinion
(concurring). I agree that our result in this case is mandated by G. L. c. 231, § 85K, but as I have written before, I am concerned when statutes are used to shield responsible parties from liability. See Barnett v. Lynn,