Bartron v. Codington County
140 A.L.R. 550, 68 S.D. 309, 2 N.W.2d 337 (1942)
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Rule of Law:
A for-profit corporation cannot lawfully practice medicine or other learned professions, as such practice contravenes public policy by tending to commercialize and debase the professions; however, a public entity that has received the full benefit of fully executed contracts for such illegal services may not be able to recover payments already made, absent a specific statutory or constitutional prohibition designed to protect public funds.
Facts:
- The Bartron Clinic was incorporated in February 1929 to operate a general medical and surgical hospital and clinic.
- Initially, its capital stock was held by duly licensed physicians, surgeons, nurses, and other employees, with 28 shares held by Joyce H. Williams, a layperson who served as secretary and on the board of directors.
- All professional services were performed by duly licensed physicians and surgeons employed at fixed salaries by the corporation, and all charges accrued to the corporation.
- The Bartron Clinic did not hold a license to practice medicine and surgery, nor to operate a pharmacy.
- From January 1933, Bartron Clinic and Codington County executed contracts annually for the corporation to furnish hospitalization, medical and surgical services, and medicine to the county's indigent persons.
- In February 1938, Dr. Bartron signed a similar contract, which the court found was made "solely for and on behalf of the corporation and with intent that the same was to be performed by the corporation."
- The professional services and medicines provided to the county were actually rendered by duly licensed physicians, except for minor intern services, at the direction and order of the county commissioners.
- The court found no intent to place control of medical practice with non-licensed persons; Dr. Bartron's purpose was to establish a profit-sharing system for leading employees.
Procedural Posture:
- Case No. 8408 originated as a claim by Bartron Clinic before the Codington County Commissioners for medicines supplied to county indigent; the commissioners allowed a reduced amount.
- Codington County appealed the commissioners' allowance for Case No. 8408 to the circuit court, where the circuit court disallowed the claim insofar as it included medicines furnished by the corporation.
- Case No. 8409 originated as an action against Codington County on five county warrants issued for Bartron Clinic's claims for professional services and medicines.
- The circuit court disallowed all items for professional services and medicines in Case No. 8409, except for certain items like X-Rays, glasses, and hospitalization.
- Case No. 8410 originated as an action by Codington County to recover $47,000 paid to Bartron Clinic for professional services and medicines over six years.
- The trial court found for Codington County in Case No. 8410 and entered judgment against the defendants for $29,220.37.
- All three cases (Nos. 8408, 8409, and 8410) were appealed to the South Dakota Supreme Court for review.
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Issue:
1. Is it unlawful and against public policy for a for-profit corporation to provide medical and surgical services and medicine through salaried, licensed physicians? 2. If such contracts are illegal and against public policy, can a county recover payments made for fully executed services from which it received the full benefit?
Opinions:
Majority - Smith, J.
Yes, it is unlawful and against public policy for a for-profit corporation to provide medical and surgical services and medicine through salaried, licensed physicians. While the medical practice act (Section 7717, Rev. Code of 1919) defines "person" to include corporations, the act's overall structure and purpose focus on regulating the personal qualifications and conduct of natural persons. The statutory provisions for licensing, examinations, and defining unprofessional conduct (Section 7711) consistently refer to individuals and do not include practice as an employee of an unlicensed corporation as a ground for disciplinary action. Therefore, the Legislature did not intend for the statute to prohibit corporate practice. However, the corporate practice of learned professions, including medicine, is contrary to public policy because it tends to commercialize and debase the professions. Public policy, derived from various legal sources and community needs, dictates that the unique ethical and trustworthy nature of professional services should not be subjected to the "undue emphasis on mere money making, and commercial exploitation" inherent in a profit corporation. The potential for lay shareholders and directors to influence professional policy and demand profits would blight the essential characteristics of the professions. Supplying medicines is an incident of practicing medicine, and thus also against public policy for the corporation. No, the county cannot recover payments made for fully executed services from which it received the full benefit. The county had the statutory power to provide for the medical needs of its poor. While the contracts were against public policy, they were not strictly ultra vires (beyond the county's power to contract for the subject matter itself). An action for recovery of payments is quasi-contractual, based on natural justice and equity. It would be inequitable for the county to recover payments while retaining the full benefits of the valuable professional services and medicines it received. This case differs from precedents where recovery was permitted because those cases involved specific statutory or constitutional prohibitions designed to protect the county or its taxpayers from financial abuse or unauthorized compensation. Here, the public policy violated concerns the character of the profession, not a direct financial safeguard for the county. Justice requires balancing the policy against unjust enrichment, and in this instance, allowing the county to keep the services while recovering payments is not warranted.
Dissenting - Warren, J.
Yes, the county should be permitted to recover payments made for fully executed illegal services. The defendants (Bartron Clinic/Dr. Bartron) should not retain the benefits derived from an unlawful act, especially since the majority concedes the contracts are against public policy. Public corporations like Codington County are not bound by rules of voluntary payment applicable to individuals; they can recover money paid on void or illegal claims or contracts. County commissioners have limited powers, and their unauthorized acts do not bind the county. Allowing the county to recover funds in this situation aligns with prior decisions (e.g., Campbell County v. Overby, Norbeck & Nicholson Co. v. State) that permitted recovery of funds paid under illegal or unauthorized circumstances to protect public monies. Furthermore, Section 10055, Rev. Code 1919, requires the appointment of a "well qualified physician" for the county asylum, which implies that a corporation cannot legally fill this role, reinforcing that payments to the corporation were not legally chargeable. Refusing to allow recovery would encourage similar illegal transactions, undermining the effort to curb them.
Analysis:
This case establishes a significant precedent regarding the corporate practice of learned professions. Despite the absence of an explicit statutory prohibition, the court articulates a strong public policy against for-profit corporations practicing medicine, grounding it in the need to prevent the commercialization and debasement of professional standards. This principle has far-reaching implications, influencing the structure of professional practices. However, the court's nuanced approach to restitution, distinguishing between contracts that violate specific fiscal protections for the county and those that contravene broader public policy, introduces an important equitable limitation on a public entity's ability to recover funds from fully executed illegal contracts. This analysis requires future courts to weigh the specific nature of the public policy violated against principles of unjust enrichment, potentially impacting how other illegal government contracts are treated in quasi-contractual claims.
