## Facts

- William Johnson subscribed to a hospital service plan that covered his minor daughter, Alfreida Johnson.
- Alfreida was struck by an automobile and admitted as an emergency patient to Newark City Hospital, a municipal hospital primarily serving indigent patients but authorized to treat non-indigent emergency patients at rates fixed by the hospital director.
- Alfreida received 70 days of hospitalization and treatment; the hospital’s standard non-indigent charges totaled $1,190.
- Newark City Hospital had a written agreement with the hospital service plan, signed by the hospital’s medical director, under which the hospital would accept a flat $100 as full payment for necessary hospitalization of eligible subscribers, regardless of duration or cost; the agreement was terminable by either party on 60 days’ notice.
- The hospital billed the plan $100 for Alfreida’s hospitalization and the plan paid $100.
- The City of Newark claimed the remaining $1,090 and asserted a statutory hospital lien against proceeds from the tort settlement with the driver.
- The parties agreed Johnson would not be personally liable for the disputed balance, leaving the dispute effectively between the City of Newark and the plan.

## Issues

1. Whether the flat-rate agreement executed by the hospital’s medical director was valid and binding on the City of Newark, despite challenges to the director’s authority to contract for the municipality.
2. Whether, given the agreement, the city could assert a statutory hospital lien for charges beyond the $100 paid by the plan.

## Decision

- The Supreme Court of New Jersey affirmed judgment for the hospital service plan.
- The court held the agreement was within the city’s corporate powers and became binding through the city’s long-standing ratification by conduct, including continued performance and acceptance of benefits with knowledge of the arrangement.
- The court further held the city was estopped from repudiating the agreement after years of acquiescence and the plan’s reliance.
- Because the agreement made $100 full compensation for covered hospitalization, the city could not enforce a lien for the additional $1,090.

## Legal Principles

- A municipality may be bound by a contract within its corporate powers even if initially executed without proper authority, when authorized officials, with knowledge of material facts, ratify it through prolonged acquiescence and acceptance of benefits.
- Estoppel may bar a municipality from denying the validity of a contract on internal-authorization grounds when the municipality has benefited and the counterparty has reasonably relied on the municipality’s conduct.
- When a hospital agrees by contract to accept a fixed amount as full payment for services to covered patients, it cannot claim additional sums through a statutory lien inconsistent with that contract.

## Conclusion

The court enforced a municipal hospital’s flat-rate payment agreement with a hospital service plan, finding the city’s long-term acceptance of the arrangement constituted ratification and supported estoppel; the agreed $100 payment satisfied the hospital’s claim and foreclosed any additional hospital lien.


Johnson v. Hospital Serv. Plan of N.J., 25 N.J. 134 (1957)