City of Picayune v. Southern Regional Corp.
| Decision Date | 08 December 2005 |
| Docket Number | No. 2003-CA-00219-SCT.,2003-CA-00219-SCT. |
| Citation | 916 So.2d 510 |
| Parties | The CITY OF PICAYUNE, A Mississippi Municipal Corporation; Patricia Crosby, Woody Spiers, Ahmad Haidar, M.D., John R. Pigott, Maria G. Beverage, Crosby Hospital Auxiliary, An Unincorporated Association, through its President Martha J. Sheppard v. SOUTHERN REGIONAL CORPORATION f/k/a Lucius O. Crosby Memorial Hospital, A Mississippi Non-Profit Corporation, and Sidney L. Whitley, Ted J. Alexander, Stanley Jack Watson, Clyde Dease, Jo Woods, Charlotte Odom, Thomas M. Casey and Lower Pearl River Valley Foundation, A Mississippi Non-Profit Corporation. |
| Court | Mississippi Supreme Court |
G. Gerald Cruthird, Picayune, Glenn Louis White, Petal, Stephen Sheppard, attorneys for appellants.
Scott W. Pedigo, James Lawrence Jones, Jackson, attorneys for appellees.
Before WALLER, P.J., CARLSON, and RANDOLPH, JJ.
¶ 1. This case is before us on appeal from a judgment handed down by the Pearl River County Chancery Court wherein the chancellor ruled to dismiss all claims asserted by representative citizens of the City of Picayune against the Southern Regional Corporation, the Lower Pearl River Valley Foundation and the common board of directors known to each. Additionally, this case is before us on cross-appeal, as the named defendants challenge a collateral determination made by the chancellor wherein he recognized that the representative citizens of Picayune had standing to bring this action. Focusing on the threshold issue presented on cross-appeal, we affirm the chancery court's judgment on direct appeal, but for reasons different than those stated by the chancellor. Finding that the representative citizens lacked the requisite standing to bring this suit, we reverse the chancellor's judgment finding that the representative citizens of the City of Picayune had standing to bring this action, and render judgment here in favor of the appellees/cross-appellants.
¶ 2. In 1949, the City of Picayune ("the City") began to consider building a hospital for the benefit of its residents. The December 12, 1949, minutes of the Mayor and Board of Alderman evidence this intention and reflect that the Ethel Crosby Foundation donated money to the City for the stated purpose of purchasing land on which to build a new hospital. While it is unclear who was originally responsible for the hospital initiative, it is clear that in 1950 the City issued hospital bonds in the amount of $90,000 and approved a contract for an architect to draw up the plans for its proposed municipal hospital, only to release the architect the very next year when it was unable to secure a grant of federal funds.
¶ 3. In 1951, the Crosby family, who had a sincere interest in providing their community with a functional medical center, incorporated the Lucius O. Crosby Memorial Hospital (heretofore referred to as the "Crosby Memorial Hospital Corporation" or "CMHC").1 Clearly a corporate expression of the Crosby family's desire to give back to their community, the Crosby Memorial Hospital Corporation was incorporated as a Mississippi nonprofit with a strictly charitable purpose. The incorporators are listed on the charter as: R.H. Crosby; R.H. Crosby, Jr.; L.O. Crosby, Jr.; Richard C. Crosby; and T.L. Crosby and for corporate purposes are considered the original "members."2
¶ 4. The charitable purpose of the Crosby family's corporation was "to acquire real estate for and to construct, purchase and otherwise acquire, equip, operate and maintain one or more hospitals ..." Pursuant to the corporation's newly specified bylaws, the already-named corporate "members" were empowered to and did elect the Crosby Memorial Hospital Corporation's Board of Trustees.3 Accordingly, they appointed five officers to this board for one year terms and charged each of them with the duty of managing the day-to-day business of the corporation. At different times, and up until 1977, Crosby family members held a majority of the management positions within CMHC and, in this way, served the corporation as "Members", Trustees and managing corporate officers.
¶ 5. On October 2, 1951, after the City withdrew its application for a license to operate a hospital and sold the donated land where the hospital was to have been built, CMCH proceeded in the City's stead and oversaw the construction of what became the Crosby Memorial Hospital ("CMH"). Raising funds from grants-in-aid which came from the State of Mississippi in the amount of $184,590, from the Ethel Crosby Foundation in the amount of $92,395, and from Crosby Chemical, Inc. in the amount of $675,298, the Crosbys utilized CMHC as their vehicle to erect CMH for a total cost of $952,284. Upon completion, CMH was then leased to the City for token consideration.
¶ 6. From 1954 to October 27, 1964, CMHC entered into three successive lease agreements with the City. After the final lease term terminated, the City assigned all of its rights relating to CMH back to CMHC, which planned to manage CMH as a nonprofit facility for the next ten years. Coordinate to this assignment, CMCH amended its bylaws. Accordingly, the Crosby family amended the corporate charter to allow for the expansion of membership "at any time by consent of a majority of members present at any meeting," to expand the Board of Trustees from five (5) to seven (7) trustees and to create an additional Board of Governors, which was charged with overseeing the operations of the hospital and related facilities. Specifically, the bylaws required that the new Board of Governors be elected by CMHC's Board of Trustees.
¶ 7. After the 1964 assignment, no significant changes occurred until 1977. Up until this time, the management positions of CMHC had been predominantly held by members of the Crosby family; however, in August 1977, the Crosby family members effectuated a major change in their closely held corporation by officially resigning their positions with CMHC's management. To this end, the participant "members" of the Crosby family turned in their resignations after unanimously electing seven new "members" pursuant to the enumerated corporate structure. The newly elected, non-Crosby family "members" were: S.G. Thigpen, Jr., Dr. D.L. Bolton, Dr. C.G. Blackburn, Ms. Trinity Williams, Ms. R.B. Vaughn, R.T. McRaney and C.J. Chatman. In turning over the reins of their non-profit corporation to the new members, the Crosbys imposed no restrictions on the corporation's assets.4
¶ 8. The front office and organizational changes made within CMHC were accompanied by improvements to CMH's facilities. City records show that the City council worked with CMH to improve the facility, either by providing additional city services, or waiving fees for building permits or other municipal costs incurred by CMH.
¶ 9. In 1987, CMHC, with the secretary of state's approval, again amended and restated its charter and corporate mission.5 The revised charter expanded the corporate purpose, and the corporation officially became "a nonprofit, non-share corporation for charitable, medical, scientific and educational purposes." The broad purposes included in the charter focused on "participating, so far as circumstances may warrant, in any activity designed and carried on to promote the general health of the community." Additionally, the 1987 amendments allowed for Communicare Systems, Inc. to be included in the CMHC membership and streamlined corporate management down to a singular Board of Governors elected directly by the corporate members. The 1987 amendments included important language concerning the dissolution of the corporation. Paragraph 10 of the amendments provided:
Upon the dissolution of the corporation, the Board of Governors shall, after paying or making provision for the payment of all the liabilities of the corporation, dispose of all assets of the corporation exclusively for the purposes of the corporation in such manner, or to such organization or organizations organized and operated exclusively for charitable, educational, religious, or scientific purposes as shall at the time qualified as an exempt organization or organizations under section 501(c)(3) of the Internal Revenue Code of 1954 (), as the Board of Governors shall determine. Any such assets not disposed of shall be disposed of by the Chancery Court of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.
¶ 10. After the adoption of the 1987 amended charter, four years passed until more changes were implemented, and, in 1992, CMHC was again streamlined. According to the newly revised Articles of Incorporation, there was to be one governing body, the Board of Governors, comprised of nine individuals serving both roles of "member" and "governor." Importantly, this new corporate structure, with a single governing board, has remained in place ever since. Another major change resulting from the 1992 amendments was the merger of Crosby Health Foundation, CMH, and Communicare Systems. Moreover, Articles of Merger were filed with the Secretary of State and the bylaws of CMHC became the bylaws of the new unified corporation.
¶ 11. In 1995, the Crosby Memorial Hospital Corporation began to assess alternatives to confront the many challenges it faced as a small nonprofit community hospital. Faced with a dilemma typical to the age and the nature of its facility, the Board of Governors was...
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