Baird v. Charleston County

• Decision Date: 18 January 1999
• Docket Number: No. 24885.,24885.
• Court: South Carolina Supreme Court
• Parties: Dr. David R. BAIRD, Dr. George D. Grice, Dr. Michael Lampkin, and Dr. Jay B. Robards, Appellants, v. CHARLESTON COUNTY, South Carolina, Respondent.

333 S.C. 519

511 S.E.2d 69

Dr. David R. BAIRD, Dr. George D. Grice, Dr. Michael Lampkin, and Dr. Jay B. Robards, Appellants, v. CHARLESTON COUNTY, South Carolina, Respondent.

No. 24885.

Supreme Court of South Carolina.

Heard October 7, 1998.

Decided January 18, 1999.

Rehearing Denied February 25, 1999.

Carl F. Muller, John C. Moylan, III, and Andrew B. Coburn, of Wyche, Burgess, Freeman, & Parham, P.A., of Greenville, for appellants.

Robert L. Widener and Michael A. Scardato, of the McNair Law Firm, of Columbia, for respondent.

TOAL, Justice:

This case involves the issuance of tax exempt bonds by Charleston County ("County") for the purchase and renovation of a medical care facility. A group of Charleston doctors ("Doctors") sued to enjoin the issuance of the bonds. The circuit court granted County's motion to dismiss and also granted summary judgment on several issues. We affirm in part and reverse in part.

FACTUAL/PROCEDURAL BACKGROUND

The Medical University of South Carolina ("MUSC") had plans to build an out-patient clinical practice facility on its campus. As plans for the new facility were being developed, an opportunity to purchase the St. Francis Hospital facility adjacent to the MUSC campus became available. MUSC determined that the St. Francis facility could be utilized to house its clinical practice programs. University Medical Associates ("UMA")¹ of MUSC chose to pursue tax-exempt bonds under the Hospital Revenue Bond Act, S.C.Code Ann. § 44-7-1410 et seq. (1976 & Supp.1997) (the "Act"), to fund the purchase price and renovation cost for the St. Francis facility.

Charleston County Council approved a bond ordinance on December 31, 1996, issuing $85 million in tax-exempt hospital revenue bonds for the purchase and renovation of St. Francis Hospital. County Council approved the bonds after a third reading of the ordinance. The bonds will be the limited obligation of Charleston County payable from the revenues of UMA's clinical practice program. It is estimated that if such hospital bonds are not issued, MUSC could pay over $25 million more in interest costs over the life of the loan to acquire the facility and over $12 million for the renovation costs of the facility. On April 8, 1997 the State Budget and Control Board, by a vote of 5 to 0, approved the issuance of the bonds.²

On June 7, 1997, Doctors sued to enjoin the issuance of the hospital revenue bonds.³ The defendant, County, made a Rule 12(b) motion to have Doctors' complaint dismissed.⁴ The trial court granted County's motion, making the following conclusions: (1) Doctors lacked standing to sue; (2) pursuant to the "Enrolled Bill Rule," Doctors could not go behind the collective action of the county council; (3) there was no allegation or proof of any alleged conflict on the part of those voting to pass the Ordinance after the third reading; (4) the trial court did not have jurisdiction to review the conflict of interest claim; (5) the record did not substantiate a conflict of interest on the part of Dr. Wallace; (6) UMA is a "hospital agency" that may participate in the issuance of tax-exempt hospital revenue bonds; (7) nothing substantiates that UMA is engaged in the unlawful practice of clinical medicine and, additionally, the proper defendant for such a claim is UMA, not County; and (8) Doctors failed to fulfill the statutory conditions precedent to filing the lawsuit.

Doctors appealed, raising the following issues:

(1) Whether physicians who directly compete with the proposed beneficiaries of a hospital revenue bond have standing to challenge the issuance of those bonds?

(2) Whether the issuance of bonds should be invalidated because of Dr. Wallace's participation on county council?

(3) Whether UMA may be considered a "hospital agency" or a "public agency" such that it may receive tax-exempt bonds pursuant to the Hospital Revenue Act?

(4) Whether UMA is engaged in the unlawful practice of medicine and, if so, whether that prevents UMA from receiving the tax-exempt bonds?

(5) Whether Doctors were required to comply with the procedure set forth in S.C.Code Ann. § 15-77-20 (1976) in filing this lawsuit?

(6) Whether summary judgment was proper under the facts of this case?

LAW/ANALYSIS

A. CONVERSION OF 12(b)(6) MOTIONS

There has been much confusion in this case over whether the trial court properly granted summary judgment on several of the issues. County's original motion before the trial court was a motion to dismiss made pursuant to Rule 12(b), SCRCP, and included, among others, the following arguments: (1) Doctors failed to comply with the procedure in S.C.Code Ann. § 15-77-20 (1976) in instituting this action; (2) Doctors lacked standing; (3) the trial court did not have subject matter jurisdiction over the conflict of interest claim; (4) Doctors failed to state a cause of action concerning the third reading of the Bond Ordinance; and (5) the trial court lacked subject matter jurisdiction and/or Doctors failed to state a cause of action as to whether UMA was a "hospital agency" or "public agency" and whether UMA was authorized to practice medicine. At the motion hearing, Doctors' attorney reminded the trial court that this was a hearing to consider County's motion to dismiss and complained about affidavits submitted by County in support of its motion. The trial court nevertheless granted summary judgment on several of the issues. Under Rule 12(b)(6), SCRCP, a defendant may make a motion to dismiss based on a failure to state facts sufficient to constitute a cause of action. Generally, in considering a 12(b)(6) motion, the trial court must base its ruling solely upon allegations set forth on the face of the complaint. Stiles v. Onorato, 318 S.C. 297, 457 S.E.2d 601 (1995). The 12(b)(6) motion may not be sustained if the facts alleged and inferences therefrom would entitle the plaintiff to any relief on any theory. Id. Rule 12(b) further provides:

If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state facts sufficient to constitute a cause of action, matters outside the pleading are presented to and not excluded by the Court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

Rule 12(b), SCRCP (emphasis added). We have interpreted this language as meaning "the trial court may treat a 12(b)(6) motion as a motion for summary judgment and consider matters presented outside the pleadings if the parties are afforded a reasonable opportunity to respond to such matters in accordance with Rule 56(c) and (e) of the South Carolina Rules of Civil Procedure. The notice provisions in Rule 56 are incorporated into Rule 12(b)(6)." Brown v. Leverette, 291 S.C. 364, 367, 353 S.E.2d 697, 698-99 (1987); see also Johnson v. Dailey, 318 S.C. 318, 457 S.E.2d 613 (1995)

. In Brown, we found the trial court had not given notice to the parties that it was going to consider the affidavits and hear the 12(b)(6) motion as a motion for summary judgment. Thus, the supporting affidavits in Brown were improperly considered by the trial court in ruling on the 12(b)(6) motion.

In the instant case, the trial court bifurcated County's jurisdictional motions and its 12(b)(6) motions. For the jurisdictional motions, the trial court ruled that it would address them as a matter of law on the facts before it. For the 12(b)(6) motions, the trial court ruled that it must convert them to motions for summary judgment since matters outside the pleadings were submitted by both parties and not excluded by it at the hearing. We find that the trial court improperly converted County's 12(b)(6) motions into summary judgment motions.

County submitted its motion to dismiss to the trial court on June 30, 1997. On September 23, 1997, just two days before the motion hearing, County filed its memorandum in support of its motion to dismiss along with supporting affidavits. At the hearing, County never argued that its affidavits and other documents were in support of its 12(b)(6) motions. In fact, County's attorney unequivocally stated at the hearing that the affidavits were being introduced in support of County's jurisdictional motion: "I have filed several affidavits in this in support of my jurisdictional motion because this gives you the background of what is at stake here and what University Medical Associates is;" "I presented affidavits that deal with the jurisdictional issues in this case."⁵ Moreover, the trial court did not give notice to the parties prior to the hearing that it was going to consider affidavits and hear the 12(b)(6) motions as motions for summary judgment.⁶ The first indication that County's 12(b)(6) motions would be converted to summary judgment motions was the trial court's order of dismissal. Under these facts, the trial court erred in converting County's 12(b)(6) motions into motions for summary judgment. See Brown v. Leverette, 291 S.C. 364, 353 S.E.2d 697

; Higgins v. MUSC, 326 S.C. 592, 486 S.E.2d 269 (Ct.App.1997) (holding that the plaintiffs had not been "fairly apprised" that the trial court would consider material outside the pleadings in support of the defendant's 12(b)(6) motion).

Nevertheless, affidavits and other evidence outside the pleadings may, in certain circumstances, be considered in support of a motion to dismiss based on lack of jurisdiction. For instance, when the allegations of the complaint are factually sufficient under Rule 8(a)(1), SCRCP, but do not affirmatively show subject matter jurisdiction, the motion to dismiss may be supported by, and the court may consider, affidavits or other evidence proving lack of jurisdiction. Woodard v. Westvaco Corp., 315 S.C. 329, 433 S.E.2d 890 (Ct.App.1993),vacated on other grounds by 319 S.C. 240, 460 S.E.2d 392 (1995)

. However, the presentation of such evidence does not...