State Ex Inf. Otto v. Kansas City College of Medicine & Surgery

The relator filed in this court an information in the nature of a quo warranto seeking to oust the respondent from enjoying the powers and privileges of a corporation.

The relator sets out several alleged reasons why the corporate franchise of the respondent should be forfeited. The important ones of these may be summarized as follows:

(a) That it keeps no intelligible record of its proceedings as a college.

(b) That although the respondent (under what is now Article XI, Chapter 90, Revised Statutes 1919) was organized as a corporation for benevolent purposes, it is conducted for private profit and gain, contrary to the law of its incorporation.

(c) That for purely monetary considerations respondent is and has been engaged in the sale of diplomas or certificates of graduation without regard to the educational qualifications or fitness of those who receive them.

(d) That the instructors in defendant's school are selected from the student body and are wholly incompetent to perform the functions and duty of teaching and giving scientific instruction necessary in a medical school.

(e) That the respondent does not maintain a properly organized curriculum covering four years' instruction which is essential for a medical school of four years' requirement, as provided by statute.

(f) That respondent, for the purpose of instruction has not provided any dispensary or any hospital where patients are received and treated and where the students may receive instruction.

(g) That one of the avowed purposes of the maintenance of the corporation as a benevolent institution is to escape the lawful payment of taxes.

Other alleged misuses of corporate powers mentioned are more or less a repetition of those enumerated.

Upon the filing of the information this court issued an order upon respondent to show cause why it should not forfeit its charter for the misuse of its powers, which order was served upon respondent June 22, 1925.

Respondent filed in this court, July 20, 1925, a demand for trial by jury and, for that purpose, transfer of the cause to the Jackson County Circuit Court. The motion was overruled August 4, 1925. Respondent filed its answer July 20, 1925, in which it denied generally and specifically the allegations of the information, and set up matters of defense, some of which were later stricken out on motion. What remains of the answer consists of general and specific denials of the charges contained in the information, together with some statements of evidence upon the issues.

This court, July 31, 1925, appointed Honorable Edwin J. Bean, of St. Louis, special commissioner, to take the testimony and report on the law and the facts in the case. The commissioner took a large volume of evidence, and March 6, 1926, filed his report, in which he made a finding of the facts and stated his conclusions of law sustaining the essential charges preferred by the Attorney-General.

The articles of agreement by which the respondent was organized were entered into January 5, 1916. This document recited that the signers desired to found a corporation under the provisions of Article X, Chapter 33, Revised Statutes 1909 (Art. XI, Ch. 90, R.S. 1919); that the name of the institution should be the Kansas City College of Medicine and Surgery; that the purpose for which it was formed was to promote the study and practice of "eclectic" medicine, surgery, pharmacy and dentistry in all their departments, with a preparatory school for each department, a post-graduate course of study of public health, and the establishment of a hospital operated therewith, etc. Charles A. Gilman, president, D.R. Alexander, secretary, and Edward H. Clark, treasurer, were the first board of directors. The articles were signed by those three men. The incorporators then applied to the Circuit Court of Jackson County for a pro forma decree of incorporation, and the court January 13, 1916, entered an order incorporating the Kansas City College of Medicine and Surgery.

The evidence shows that Dr. Alexander, the nominal secretary of the institution, was in fact the institution. He was business manager, handled all the funds, collected and disbursed all money paid to the institution. The management and control of the respondent's affairs were at all times in his hands. The corporation had no bank account. The laboratory man received one hundred dollars a month, and lived in the institution. The treasurer lived in the institution, and was supposed to receive fifty dollars a month, but it was seldom paid to him, and he handled none of the money of the institution. At the time of the hearing the institution owed him about six thousand dollars, according to Dr. Alexander. Dr. Alexander himself received all the money and put it into his pocket after defraying the expenses incurred. So far as the books of the institution showed, none of the money was ever paid out for equipment in the conduct of the college except one item for a tank that cost seventy dollars.

Dr. Frederick C. Waite, representing the American Medical Association, inspected respondent's school and testified in the case. Dr. Alexander said to him: "I am the school."

The curriculum was nominally a four years' course, but what is called a repetitive curriculum: the work of the junior and senior years were the same and were combined. It was not a school of four years' requirement. There was no hospital connected with the school, and no dispensary. Alexander said that a hospital was under construction, and that the students could go to other hospitals on their own initiative, but as far as he knew, and so far as required, men who graduated had never seen a sick patient. The evidence showed that proper hospital experience was necessary in a proper medical education. Dr. Waite swore that on one occasion Dr. Alexander said he knew he was not running a medical school.

Dr. Alexander was charged with the sale of diplomas, and a few examples will illustrate his method: Clarence L. Hobbs graduated from the St. Louis College of Physicians and Surgeons in 1922. A graduation from that school did not entitle him to examination for a license by the State Board of Health of Missouri, nor by the Board of Health of Connecticut. Hobbs desired to practise medicine in Connecticut, and Alexander told him that he would arrange it so that Hobbs could take the Connecticut board examination. He accomplished this by granting to Hobbs an honorary degree from the Kansas City College of Medicine and Surgery. With that diploma Hobbs passed an examination and received license to practice medicine in Connecticut. The so-called honorary degree or diploma thus issued to Hobbs was in this form:

"KANSAS CITY COLLEGE OF MEDICINE AND SURGERY, KANSAS CITY, MISSOURI.

"Know all men by these presents: That ____, M.D., has complied with all the requirements of this college and has passed the prescribed examination which entitles him to a diploma from this institution, therefore, we, the trustees and faculty of the Kansas City College of Medicine and Surgery, of Kansas City, Missouri, by virtue of the authority vested in us by the Legislature of the State of Missouri, do confer on him the degree of Doctor

HONORARY

in Medicine and Master in Surgery, with all the privileges and immunities thereunto belonging in this or any other country:

"IN TESTIMONY WHEREOF, we do hereunto affix our seal and signatures, dated at Kansas City, Missouri, this ninth day of June, A.D. MCXXII.

(Signed) "R.O. RHODES, M.D., President. "D.R. ALEXANDER, M.D., Secretary. "E.E. HUBBARD, M.D., C.M., Dean."

Seal of:

"Kansas City College of Medicine and Surgery — Corporate Seal."

Hobbs testified that the word "honorary" was not in there when he received the diploma. He put it in himself. He copied it from the diploma of his brother Alonzo G. Hobbs; the term, however, was engrossed at the direction of Dr. Alexander.

This document certifies that ____ M.D., "has complied withall the requirements of this college and has passed theprescribed examination which entitles him to a diploma from thisinstitution." Except for the word "honorary" it is in terms a diploma, and not an honorary degree.

Alonzo G. Hobbs, brother of Clarence L. Hobbs, also graduated from the St. Louis School of Physicians and Surgeons, and bought a like honorary degree from Alexander. This diploma was delivered to Alonzo G. Hobbs in St. Louis. Clarence L. Hobbs paid Alexander $250 for his honorary diploma. Alonzo G. Hobbs paid $150 for his.

One William P. Sachs was employed by Leroy Combs to obtain for Combs a medical diploma from respondent's school. Combs lived in Connecticut. Sachs knew Alexander. In March, 1923, Sachs went to Kansas City to see Alexander and told him that Combs would give him $250 for a diploma from Alexander's school. Alexander said the price was $500. Sachs gave Alexander $250 in cash, and his own check for $250, assuming that Combs would repay him that amount. Dr. Alexander told Sachs that he never delivered a diploma to anyone other than the one to whom it was issued. He requested Sachs to have Combs meet him at Hotel Gard, New Haven, Connecticut, where he would deliver the diploma to Combs. Combs, however, refused to pay $500 for the diploma. In that case there was no evidence to show that Combs ever had attended respondent's school, or any other medical school. Alexander did not inquire if Combs had previously attended a medical school. In November, 1924, Sachs saw by the record of the State Board of Health of Connecticut that Combs had a license to practice medicine in that State,

Dr. R. Adcox was produced as a witness. He knew Alexander and testified that he talked to Alexander about degrees and diplomas; he had seen diplomas issued by Alexander's school. One such diploma was held by a man named Hull, who graduated from the St. Louis school in 1917 or 1918. Hull came to him with Ralph Voight, who brought the honorary diploma. The word "honorary" on that diploma was written in with pen and ink, but Voight, when he brought the diploma from Kansas City, erased the word "honorary" before he delivered it to Hull. After the erasure it appeared the same as a senior graduating diploma. Hull desired to get a license from the Connecticut board, and he was obliged to have an eclectic diploma and that was the kind that Voight got for him. He paid $500 for it. There is nothing in the evidence to show that Alexander ever saw Hull, or that Hull ever was in the Kansas City school. Alexander did not deny any of the testimony in connection with these honorary diplomas.

Dr. Waite also testified that Alexander admitted to him that he sold Doctor of Divinity degrees. He mentioned one case where Alexander said a rascal came to him and wanted to be a Doctor of Divinity. The applicant said he had bought out a Sunday-school publishing business, and if he had a Doctor of Divinity diploma hanging over his desk it would help him to get business. Alexander made him Doctor of Divinity and explained: "But I stung him $300."

Dr. Alexander told Dr. Waite, so the latter testified, that he sold honorary degrees or diplomas for a minimum price of $200, but that the notoriety was improving the situation and he was going to charge more. He admitted that the money he received for those diplomas he put into his pocket; he considered it his personal perquisite.

Dr. Stratton D. Brooks, of the University of Missouri, who had had wide experience as an educator with medical and other schools, testified that medical schools do not issue honorary degrees, and that honorary degrees by schools entitled to issue them are not paid for.

I. Although the respondent's demand for a jury to try the case was overruled by this court before the argument on the merits, he still insists that a constitutional right has been denied him, for which he should be discharged and the proceeding dismissed. The previous holdings are against the position of the respondent. This court, having original jurisdiction in quo warranto proceedings, has uniformly held that a corporation whose right to exist is inquired into in a quo warranto proceeding has no right to a trial by jury. [State ex rel. v. Vail, 53 Mo. l.c. 107; State ex inf. v. Arkansas Lumber Co., 260 Mo. l.c. 275.] In those cases this court explained the reason for denial of the right to jury trial. Many other cases by this court have announced the same doctrine.

Respondent claims that under Section 10276, Revised Statutes 1919, the proceeding should have been instituted in the county where the corporation was organized. If that were so only the Circuit Court of Jackson County would have jurisdiction of the case. That section does not confer exclusive original jurisdiction in quo warranto proceedings against a corporation. [State ex rel. v. Social Club, 169 Mo. App. l.c. 147.] Such proceeding may be instituted in the first instance in this court by information filed by the Attorney-General. [State ex rel. v. Board of Trustees, 175 Mo. l.c. 58; State ex rel. v. Men's Club,178 Mo. App. 548.]

The conclusions of the commissioner are not binding on this court, but they are advisory and helpful.

II. Section 10271, Article XI, Chapter 90, Revised Statutes 1919, relating to benevolent associations, provides: "No association, society or company formed for manufacturing, agricultural or business purposes of any kind, or for pecuniaryprofit in any form, nor any corporation having a capital stock divided into shares, shall be incorporated under this article."

That provision of the statute was violated, warranting the forfeiture of the franchise of the respondent. The building in which the school was operated was owned by the Eclectic Building Company, which also owned the apparatus; the school paid rental for the use of the building and apparatus. The school owned nothing. The Eclectic Building Company had five hundred and twenty shares of stock. Dr. Alexander owned one share, Dr. Beebe owned one share, and the janitor owned one share; five hundred and sixteen shares stood in the name of Leroy Overly, Alexander's step-father. Alexander really owned those shares.

The evidence summarized above justifies the conclusion that Dr. Alexander conducted the school solely for his own private gain. [State ex inf. Hadley v. Meramec Rod Gun Club,121 Mo. App. 364.]

III. Section 7332, Revised Statutes 1919, as amended in Laws 1923, page 254, requires an applicant desiring to practice medicine and surgery in the State in presenting his application to the Board of Health to "furnish satisfactory evidence of having received a diploma from some reputable medical school of four years' requirement, including two years in operative and hospital work at the time of graduation."

In 1921 the Legislature amended the statute by striking out the word "reputable." In 1923 the statute was again amended by restoring the word "reputable."

The evidence shows that the Board of Health of the State of Missouri never regarded the respondent's school as a reputable school. No license to practice medicine was ever issued to anyone presenting a diploma from that school except while the word "reputable" was omitted from the law.

It is earnestly argued by respondent that even if the Kansas City College of Medicine and Surgery did not furnish a school of four years which the statute provides for, nevertheless it was a perfectly lawful school; that its charter did not require it to maintain a perfect curriculum. That it could, if desired, teach nothing but anatomy, or nothing but chemistry, etc.; could conduct a six months' course in any branch of medicine or surgery and it would be no violation of the law.

True enough, such a school could lawfully be conducted, but it would be violation of the law to conduct it under pretense that it was a school of four years' requirement, and to certify that its graduates were entitled to diplomas as medical graduates. There was evidence to show that the respondent had issued fifty or sixty diplomas for $200 each to persons who never attended the school. A corporation may forfeit its franchise by misuse of its powers in a way detrimental to the public welfare. We can imagine no more serious injury to the public than the issuance of degrees to practice medicine to persons wholly unqualified to treat the sick. [Independent Medical College v. People, 182 Ill. 274; State ex rel. Attorney-General v. College Co., 63 Ohio St. l.c. 341.] A fraudulent misuse of its powers to confer degrees will justify the dissolution of an educational institution. [11 C.J. 1000.]

The respondent's counsel in their brief deny that there was any sale of diplomas or certificates of graduation. They argue that the school had a right to issue honorary degrees and receive money for them. The word "honorary" is not a part of such diploma, but is written in upon the ordinary graduating certificate. It states that the recipient has complied with all the requirements of the college and has passed the prescribed examinations; a bare falsehood. That is equivalent to saying that the student receiving the degree has graduated from the school. Otherwise, how could he comply with the "prescribed requirements" which entitle him to a diploma from the institution? Fifty or sixty of these were issued to students who never had been in the school, and the evidence shows at least one instance where a diploma was issued to a student who was not shown to have been in any medical school. The instrument is not an honorary degree, but a diploma to a Doctor of Medicine and Master of Surgery. It was strictly a sale of diplomas.

The evidence satisfactorily shows that the respondent has violated the law of its organization in at least two respects: It has been conducted for pecuniary profit, which that law forbids. It has misused its corporate powers in a manner which threatens serious injury to the public welfare.

Wherefore, it is ordered that the respondent, the Kansas City College of Medicine and Surgery, be dissolved as a corporation, and that its charter and franchise as hereinbefore granted be forfeited and revoked and for naught held, and that the relator herein recover of and from respondent the costs herein laid out and expended. All concur, except Otto, J., not sitting.