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might have arisen on that appeal can now to that effect, or such agreement can be be raised on the exceptions to and appeal readily implied from the course of business from the judgment confirming the sale of between the partners. The evidence in this the other property. We do not think the case does not show such an agreement bechancellor erred, however, in overruling the tween the partners, nor does it, in our opinexceptions to the report of sale, notwith- ion, raise the implication that such an unstanding his error in refusing to sell the book derstanding existed between them. Thereof expirations with the other property sold. fore the chancellor did not err in refusing The purchaser at the sale did not claim to appellant the additional compensation asked. have been prejudiced by that error of the It is also insisted for appellant that the court, and, in all probability, the book of ex- commissioner and court erred in allowing appirations at the time of the sale had be- pellee one-half the profit of $1,100 made come practically valueless. from the lapse on the Stem property. An option was takof time, and the expiration, in large part, en on this property by appellant in the name of the policies, the dates of which appear of the firm, and sold to Overman & Scroder therein. The book of expirations should yet Cordage Company at the profit named. We be sold by order of the court.

think the evidence shows that while this Appellant complains that the commission- transaction was, in the main, conducted by er's report of settlement and the judgment appellant, it was done in the firm name and rendered thereon should have allowed him, for the firm. And the suit which was in addition to his share of the profits of the brought against Stem to recover the profit partnership business, compensation or salary realized on the transaction was in the name as manager of the business during the ex- of the firm. If no recovery bad resulted, istence of the partnership, which compensa- appellee would have been equally liable with tion, he insists, should be at least $100 per appellant for the attorney's fees and other month. It is contended by appellant that costs incident to the action. It was not he had, during the existence of the partner- error, therefore, to allow appellee one-half ship, the active management of the business of the profit on the Stem property. of the firm, and was faithful and efficient in There, are, however, at least three errors the conduct thereof, whereas appellee dur- in the report of settlement and judgment: ing the whole of the partnership, except the First. They fail to charge appellee with half last two years, was assessor of the city of the attorney's fee and costs expended by Covington, at a salary of $2,400 a year, and, appellant in the suit against Stem. Second. by reason thereof, had no time to devote to They fail to charge the firm with certain the business of the firm, and did not, in fact, expense moneys necessarily paid out by apdo so. It, however, appears that, when tak- pellant from year to year during the parten into the firm by appellee as a partner, ap. | nership in the conduct of the firm's business. pellant was quite young and inexperienced, Appellant should have credit by such of and out of employment. Upon the other these expenditures as the evidence may show hand, appellee at that time was a well- were made by him for the firm. Third. Apknown and active business man, with an pellant should have been allowed one-half established insurance business, and bis posic of the dividends collected by appellee on tion as assessor of Covington gave him a four shares of stock in the Covington Coal wide acquaintance with the people of that Company which had never been charged to city having property to insure; and it ap- appellee on the books of the firm. We think pears from the evidence that he used his of the evidence shows that this stock was the ficial position to good effect in obtaining property of the firm, though transferred to business for the firm. Though but little and held by appellee alone to enable him to of his time was spent in the office, and the become a director in the coal company. clerical and other active work of the firm was Because of the errors indicated, the judg. done by appellant, there can be no question ment confirming the report of settlement is but that appellee, by reason of his older busi- reversed, and the cause remanded for furness head and experience as the senior mem- ther proceedings consistent with the opinion. ber of the firm, his official position, and personal popularity, was at all times during the continuation of the partnership a po. ILLINOIS CENT. R. CO. v. BUCHANAN. tent factor in maintaining its financial stand

(Court of Appeals of Kentucky. June 15, ing and bringing to it business and patron

1905.) age. The mere fact that appellant did the

CORPORATIONS - AFFILIATED INSTITUTIONS greater part of the clerical and other work

SEPARATE ORGANIZATIONS – - LIABILITY of the firm, and had the active management DOMINANT CORPORATION. of its business, would not have justified the

A railroad hospital association was organ

ized as a corporation independent of the railcourt in allowing him a salary. It is a well

road, and by its articles its directors were derecognized rule of law in respect to partner- clared to be certain officers of the railroad and ships that partners are not entitled to charge their successors in office; and all employés each other, or the firm of which they are

of the railroad were, as such, made members

thereof. By its by-laws, employés of the railmembers, for their services in the firm busi

road were entitled to its benefits in case of illness, unless there is a special agreement ness or accident, and were required to pay a

OF

monthly assessment, proportionate to their sal- tion. The hospital of said association is loaries, for its support. These assessments were

cated at Paducah, Kentucky, and the prin. deducted by the railroad from the employés' salaries, and paid over to the treasurer of the

cipal office and place of business is at Pahospital association for its benefit. Held, that ducah, Kentucky. the hospital corporation was a separate and "Art. 2. The object for which the corporadistinct organization from the railroad, and the

tion is formed is to give proper care and latter was not liable for the conduct of the hospital directors, nor for the negligence of

treatment to the sick and wounded employees physicians or attendants of the hospital in of the Illinois Central Railroad Company on treating a railroad employé.

the Louisville Division, and that portion of (Ed. Note.—For cases in point, see vol. 36,

the Memphis Division extending from PaduCent. Dig. Charities, f 103.)

cah, Kentucky, to Memphis, Tennessee, and Hobson, C. J., and Nunn, J., dissenting.

including Memphis, Tennessee. Appeal from Circuit Court, Hopkins Coun- "Art. 3. The corporation shall have the ty.

right to sue and be sued, contract and be "Not to be officially reported.”

contracted with, have and use a common Action by Ed Buchanan against the Illinois seai and alter the same at pleasure, and reCentral Railroad Company. From a judg

ceive and hold such property real and perment for plaintiff, defendant appeals. Re sonal, whether obtained by purchase, gift, or scrsed.

devise as may be necessary to carry on or

promote the objects of the corporation, and J. M. Dickinson, Trabue, Doolan & Cox,

may sell or dispose of such property at and Gordon, Gordon & Cox, for appellant.

pleasure, unless the property has been receivC. J. Waddill and Wm. Worthington, for ap- ed as a gift or devise, for some special purpellee.

pose and if so received it shall be used and

applied only for such purpose. The corporaPAYNTER, J. While appellee was in the tion may adopt such rules for its governservice of the Illinois Central Railroad Com. ment and operation not inconsistent with law pany his kneecap was broken, and he was as the directors may deem proper, but it sent to the Illinois Central Hospital for treat- shall not be operated, managed or used for ment. He claims that while under the care private gain or engaged in any plan or of the physicians and nurses of the hospital scheme of banking or insurance. The corhe was unskillfully and improperly treated, poration by the consent of two-thirds of the and thereby sustained damages, and this ac- directors may amend any part of the artition was instituted to recover them, a trial cles of incorporation by filing and recording of which resulted in a verdict for him. The the amendment in the office of the Secretaalleged right to recover of the Illinois Cen- ry of State and recording in the county clerk's tral Railroad is based upon the averment office of McCracken county, Kentucky. The that it had entered upon a contract with corporation for the support of its hospital him by which it undertook, in the event of shall have power to levy a monthly assessbis injury, “that he should be properly and ment upon the members of the corporation skillfully treated by proper and skillful sur- of such sums as shall be fixed by the bygeons in attendance.” The court, by its in- laws of the corporation and enforce the paystructions, in substance, submitted to the ment of such assessment in the manner projury the issue made by a denial of the above vided by the by-laws of the corporation. averment.

"Art. 4. All officers and employees of the The appellee had been in the employ of Ilinois Central Railroad Company on the the Illinois Central Railroad Company for Louisville Division and that portion of the more than four days, and therefore was en- Memphis Division extending from Paducah, titled to be received by the Illinois Central Kentucky, to Memphis, Tennessee, including Hospital Association at Paducah for treat- Memphis, Tennessee, shall be members of ment. The Illinois Central Railroad Hospi- the corporation except persons of known tal Association is a corporation organized disability or suffering from chronic disease. under the general laws of this state. The "Art. 5. The corporation shall be governarticles of incorporation read as follows: ed by a board of eleven directors constituted

"That M. Gilleas, W. J. Harahan, A. Phil. as follows: M. Gilleas, the assistant general brick, D. G. Murrell, John L. McGuire, John superintendent of the Southern lines of the W. Whedon, have associated themselves pur- Illinois Central Railroad Company and his suant to an act of the General Assembly of successors in office; D. G. Murrell, the assistthe commonwealth of Kentucky of March 22, ant chief surgeon of the Illinois Central Rail. 1892, which act is incorporated into chapter road Company, located at Paducah, Ken32, section 879, 880, and. 881, Kentucky Stat- tucky, and his successors in office; W. J. utes, to form a charitable corporation, from Harahan, superintendent of the Louisville which no private pecuniary profit is to be Division of the Illinois Central Railroad derived, and have formed and now form Company, and his successor in office; A. such corporation and adopt the following ar- Philbrick, the superintendent of the Memticles of incorporation:

phis Division of the Illinois Central Railroad “Article 1. The name of the corporation is Company, and his successor in office; H. R. Illinois Central Railroad Hospital Associa- Dill, the assistant superintendent of the Ev. ansville District of the Illinois Central Rail- the physicians and nurses in charge of the road Company, and his successor in office; institute. It will be observed, by article. 4, L. A. Downs, the road master of the 10th that all officers and employés of the Illinois Division of the Illinois Central Railroad Com. Central Railroad Company are members of pany, and his successor in office; D. Sheahan, the corporation, with certain exceptions. By the road master of the 13th Division of the article 3, the hospital corporation, for its Illinois Central Company, and his successor support, shall ve power to levy upon its in office; John McGuire, John W. Whedon, members such sums as shall be fixed by the and John Lane. The term of office of the by-laws of the corporation, and enforce their first-named eight members of the board of payment as provided by the by-laws. Undirectors shall be continuous. The term of der the by-laws of the corporation, those office for the last named three of the board entering the service of the Illinois Central of directors shall be for one year, and until Railroad Company who work more than four their successors shall be elected. The succes- days are entitled to the benefits of the hossors of the said three members shall be elect- pital. Under the by-laws, the members of ed by the other eight members of the board the association who receive $40 per month on the second Friday in August, 1901, and and under are required to pay 40 cents annually thereafter, and shall be so selected monthly, and the amounts to be paid by as to represent as nearly as possible the em- other employés are governed by the salary ployees of the transportation department, of or compensation received by them. Memthe mechanical department and of the road bers of the association are entitled to free department and such persons shall be select- medical and surgical attendance, medicine, ed from said departments as will best be board, and nursing at the hospital while disable to attend all meetings of the board of abled, whether from sickness or injury, undirectors. M. Gilleas shall be chairman of less the disability arises from certain disthe board of directors and shall be succeeded eases. Sums which the members of the asin the chairmanship of the board of direct- sociation are required to pay are collected ors by his successor in office, the assistant by the Illinois Central Railroad Company to general superintendent of the southern lines pay the expenses of the hospital, and it goes of the Illinois Central Railroad Company. into the hands of the treasurer of the hosThe regular meetings of the board of di- pital association, who is also the treasurer rectors shall be held quarterly on the second of the Illinois Central Railroad Company. Friday in February, May, August and No- There is no evidence that the Illinois Cenvember of each year, and the meeting held in tral Railroad Company retains or gets the August shall be the annual meeting of the benefit of a cent of the money or enjoys any board of directors. All the corporate pow- profit by the operation of the hospital. Uners of the corporation shall be vested in the der the articles of incorporation, the appelboard of directors. The board of directors lant does not even retain control of the funds shall elect all officers except chairman of the which it gathers for the association, for they board, and shall fix the term of office of the go to the treasurer of the hospital associaofficers of the hospital at one year with tion. The parties who are designated as dipower to remove such officers for cause, rectors are not made so as the officers of which shall be stated in writing and acted the Illinois Central Railroad Company, but upon by a majority of the members consti- they are selected by the hospital association tuting the board. The by-laws shall provide by reason of the fact that they hold such for the government of the hospital, for prop. positions with the Illinois Central Railroad er committees of the board and for such Company. The evident purpose is to make officers as the board of directors may deem it easy to keep a full board of directors of proper for conducting the business of the the hospital, and that that board shall be corporation. The principal officer of the composed of persons who are entitled to the corporation shall be the chairman of the benefits of it, and who are interested in its board of directors,

success. The mere fact that the board of "Art. 6. The corporation shall begin its ex- directors are selected by the hospital assoistence when these articles have been filed ciation by reason of the fact of their conin the office of the Secretary of State of Ken- nection with the Illinois Central Railroad tucky and recorded in the office of the coun- Company does not make them the agents ty clerk of McCracken county, Kentucky, or officers of the Illinois Central Railroad and shall continue for fifty years from that Company in the performance of a duty for date."

another and distinct corporation. The duThese articles of incorporation were sign- ties which they are required to perform are ed by the persons designated as directors not such as are required in the execution therein, and were duly acknowledged and of the purposes and objects of the organizarecorded, and the corporation was thus reg- tion of the appellant. ularly formed. It is contended that the di- There is no evidence showing that the rectors are officers and agents of the Illinois Illinois Central Railroad Company made any Central Railroad Company, and therefore contract with the appellee that he should be the Illinois Central Railroad Company is lia- “properly and skillfully treated by propor ble for the misconduct or unskillful act of and skillful surgeons and attendants." The fact that the hospital association was or- of injuries and damages sustained by the ganized for that purpose does not tend to malpractice of the house surgeon of the Illiprove that the appellant made such a con- nois Central Railroad Hospital Association. tract with the appellee. There is an implied The evidence shows that this surgeon was contract between the employé who becomes either incompetent, or that he treated appela member of the association and the Illinois lee so negligently and carelessly that he was Central Railroad Company that the latter injured, rather than benefited, and was amwill pay over the money which it retains ply sufficient to authorize the court to subout of his earnings to the treasurer of the mit the question to the jury. This court rehospital association for its benefit. The Illi- verses this judgment upon the ground that nois Central Railroad Company is simply the there was a failure of proof showing any agent that gathers the funds for the benefit contract on its part to furnish appellee comof the hospital association-consequently for petent and skillful surgeons to treat his inthe benefit of its members. So the proposi- juries while in its employ; that the hospital tion is presented that, because the Illinois association was and is a charitable, indeCentral Railroad Company simply acts as pendent corporation; that appellant was and the agent in the gathering of the funds from is in no wise responsible for its conduct; its employés for the hospital purposes, it that the services performed by the appellant thereby made a contract to be responsible for the hospital association were performed for the conduct of those in control of the as its agent. The effect of the opinion by a hospital-a separate and distinct corpora- majority of the court to overrule the case tion. If the Illinois Central Railroad Com- of this appellant against Gheen, 66 S. W. 639, pany was the real party in interest, and was 23 Ky. Law Rep. 1952. simply using the hospital association for its I have the record in the Gheen Case before financial profit, then the court might con- me, and have examined it with care. The sider whether or not it was a case where it appellant made the same defense as to nonshould look at the substance, and not the liability for the acts of the association in shadow, of things, in determining its lia- that case as in this. The same proof upon bility. But this question has not arisen be- this question was introduced in that case as cause of the facts we have detailed. Doubt- in this. The by-laws for the operation and less the Illinois Central Railroad Company control of the association were introduced in is indirectly benefited by its employés hav- that case and in this, and they are identical, ing proper and humane treatment at the hos- except in verbiage, and also at that time pital prepared for them, but that incidental there were 9 directors, while now there are benefit cannot raise the question suggested, 11. In that case, as in this, the court told or make it liable for the act of servant or the jury, in substance, that if they believed agent of an independent corporation.

from the evidence that the hospital associaOur conclusion is that the hospital corpo- tion was operated and controlled by its memration is a separate and distinct corporation bers, and was not operated and controlled from the Illinois Central Railroad, and that by the appellant, they should find for it. the latter has no financial interest in the re- The only difference between the facts in the sult of its management, and in no way is it two cases with reference to the point under liable for the conduct of its directors, or the discussion is that the association was then physicians or the attendants at the hospital. a copartnersbip, while now it is a corporaThe appellee is a member of the hospital as- tion. In the Gheen Case, supra, this court sociation, and those in charge of it in part said: “The testimony as to the formation, serve him and his interest; and he contrib- conduct, and management of the hospital utes to help pay the expenses of those per- presents no material disagreements as to the forming that service, and for the care and facts. These appear to be that each emtreatment of his associate employés. A per- ployé on the Louisville and Memphis Diviemptory instruction should have been given sion, who is employed as much as four days to the jury to find for the appellant.

in a month, contributes to the maintenance We have not seen proper to discuss the and support of the hospital. The sum payaquestion as to the liability of the Illinois ble is fixed by a scale according to wages Central Railroad Company for plaintiff's earned per month, and the amount payable is Injury, had it owned or controlled the hos- withheld by the paymaster of the appellant pital, nor the liability of the hospital asso- out of the wages due the employé, and turnciation for the alleged unskillful acts of the ed into the hospital fund, which is held by surgeons and attendants in charge of it, be- the treasurer of the appellant. The hospital cause, from the conclusions we have reached, association is not incorporated, nor, on the these questions do not arise, and had best other hand, is it purely voluntary. If the be discussed when a case involving them is fact that an employé has no option about brought to the consideration of the court. paying out of his earnings the fixed assess

The judgment is reversed for proceedings ment for the support of the hospital could consistent with this opinion.

be termed a voluntary payment, then the

hospital association might be termed a volNUNN, J. (dissenting). The appellee recov- untary association. It has a board of directered a judgment against appellant on account ors, but these are such, save two, by reason

with

shall be continuous. The term of office of

the engineer, who are selected by the other mem- ors shall be for one year, and also the sucbers. The surgeon in charge is practically cessors of the last three shall be elected by appointed by the chief surgeon of appellant. the other eight members of the board. By The men who contribute the monthly assess- section 3 of the by-laws it is provided: “The ment to pay the hospital expenses have in association shall be governed by a board of fact no voice in the management or control eleven directors constituted as follows, the of the hospital, save and except that of giv- assistant general superintendent, Southern ing certificates of admission thereto to sub- lines, who shall be chairman of the board, ordinate employés when sick or injured. the assistant chief surgeon, Paducah, Ky., Employés of the class of appellee have no the superintendent, Louisville Division, the rights or powers in regard to the hospital, superintendent, Tennessee Division, the assave that of paying the monthly assessment, sistant superintendent, Evansville District, which in fact they never see, and the right the road master, Louisville Division, the road of treatment in case of injury or sickness. master, Tennessee Division, the master meAs to the ownership of the hospital grounds chanic, Paducah shops, an employee of the and buildings and equipment there is no transportation department, an employee of proof. We are of opinion that these facts, the machinery department and an employee proven without serious, if any, contradiction, of the road department." By section 8 of would have authorized the court to instruct the by-laws it is provided that the chief surthe jury peremptorily that, if appellee had geon of the Illinois Central Railroad Combeen engaged more than four days, he was pany will appoint the surgeon in charge of entitled to admission into the hospital, and, the hospital, and is also required to appoint if he was refused permission to enter, or and fix the salaries of the local physicians certificate entitling him to transportation and within the territory covered by the associaentrance to the hospital, and was injured by tion. By section 9 it is provided: “The local such refusal, he was entitled to recover. It treasurer of the Illinois Central Railroad Co. is clear, that if appellant corporation ceased at Chicago shall be the treasurer of this asto exist or should attempt to withdraw from sociation, and shall receive all moneys bethe hospital, the hospital would cease to be longing to the hospital, and pay all bills of any service. The appellant is the very life against it, upon vouchers certified to by the of the hospital association. Its funds, man- surgeon in charge and approved by the chief agement, control, and service are all furnish- surgeon of the Illinois Central Railroad Co." ed by appellant. In fact, the hospital asso- By section 10 it is provided: “The auditor of ciation is the Illinois Central Railroad." disbursements of the Illinois Central Railroad

The facts stated in this opinion agree pre Co. shall act as the auditor of this associacisely with the facts as shown by the record tion." It appears from the proof that these in the case at bar, except that the huspital three officials last named have their offices in was then an association or copartnership, Chicago, and are the chief officers of their and, since then, and in the year 1900, it at- respective departments of the appellant, and tempted to become incorporated as a charita- it is not contended that they are or ever ble organization. If in the Gheen Case the have been members of the hospital associafacts proven showed conclusively that the tion. It is, indeed, singular, if it is a fact appellant operated and controlled the hospi- that this hospital association is an independtal, then, under the same facts, why or how ent association, and not governed or controlis it to be said that it does not operate and led to any extent by appellant, that it would control the same association? Can it be that organize by selecting the chief officials of it is because it now has the name of "cor- appellant, wlio are not members of the assoporation”? Has the word “corporation" ciation, and give them full and complete about it some magic which prevents its con- power to control and govern the association, trol by anybody or anything? In my opinion, and take from itself all power and right to if the appellant controlled and operated the manage the institution. As will be seen, the hospital as an association or a copartner- association is controlled by the officials of ship, it controls and operates it as a corpora- the appellant, and the employés have no voice tion. By a unanimous opinion in the Gheen in its control. The board of directors providCase this court decided that appellant did ed in by-law No. 2 that all officers and emcontrol and operate this hospital, and that ployés in the above territory shall be memthe hospital was a part of appellant. The in- bers of the association, except those afficted corporation of the hospital did not give it with chronic or other named diseases. By any greater rights or higher powers than it section 15 it is provided: “Any member of had before the incorporation, the only differ- the association in any manner leaving the ence being that it would be more convenient service of the company, ceases at once to to sue and be sued in its corporate name than have any participation in the funds." Thus as a copartnership. Under the articles of in- it appears that a prerequisite to membership corporation, copied in the opinion, it is pro- in this association is that the party must be vided that the term of office of the first-nam- an employé of appellant, and, when he ceases ed eight members of the board of directors to be an employee of appellant, it matters

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