Practice Service Corp. v. HCA Health Services of California, Inc.

Practice Service Corporation (PSC) and CMS, Inc. (CMS) (plaintiffs and appellants) sued HCA Health Services of California, Inc. (HCA or respondent) and others for fraud and other torts. An alleged cotortfeasor, Western Health Associates Medical Group, Inc. (WHA), had declared bankruptcy and so was not a defendant. HCA demurred to the complaint and the trial court sustained the demurrer without leave to amend on the ground that only the WHA trustee in bankruptcy, not appellants, had standing to bring this action against HCA. We disagree and reverse the judgment of dismissal.

Factual and Procedural Background

PSC leased employees and CMS provided consulting services to WHA, a medical group whose doctors (Drs. Clark, Click, Fowls, and Sadja) provided psychiatric services to patients. WHA had a service agreement with Canyon Ridge Hospital and provided it with a medical director and other health care professionals. HCA was a general partner of Canyon Ridge Hospital.

Appellants (PSC and CMS), as a result of services they provided to WHA became its creditors. On March 1,1991, WHA executed promissory notes to appellants, $310,165 to PSC and $121,562 to CMS. WHA also had an…