Cook v. Lloyd Noland Foundation, Inc.

• Decision Date: 07 September 2001
• Citation: 825 So.2d 83
• Parties: Magnolia COOK and Wyndolyn Cook v. The LLOYD NOLAND FOUNDATION, INC., and Tenet Healthcare, Inc. Sam Russell v. The Lloyd Noland Foundation, Inc.
• Court: Alabama Supreme Court

825 So.2d 83

Magnolia COOK and Wyndolyn Cook v. The LLOYD NOLAND FOUNDATION, INC., and Tenet Healthcare, Inc.

Sam Russell v. The Lloyd Noland Foundation, Inc.

1901.

Supreme Court of Alabama.

September 7, 2001.

Rehearing Applications Denied December 28, 2001.

William J. Baxley and Joel E. Dillard of Baxley, Dillard, Dauphin & McKnight, Birmingham, for appellants Magnolia Cook and Wyndolyn Cook.

Jon B. Terry of Bains & Terry, Bessemer; and Ralph L. Armstrong, Bessemer, for appellant Sam Russell.

William C. Knight, Jr., Gerald P. Gillespy, and Brent D. Hitson of Burr & Forman, L.L.P., Birmingham; and Daniel J. Reynolds, Jr., of Brown & Battles, Bessemer, for appellee The Lloyd Noland Foundation, Inc.

J. Forest Hinton and Susan S. Wagner of Burkowitz, Lefkovits, Isom & Kushner, P.C., Birmingham, for appellee Tenet Healthsystem Lloyd Noland Medical, Inc.

JOHNSTONE, Justice.

Magnolia Cook and Wyndolyn Cook appeal the order of the trial court dismissing their action to enjoin The Lloyd Noland Foundation, Inc. ("Foundation, Inc."), from selling Lloyd Noland Hospital to Tenet Healthcare, Inc., and to redress other alleged misconduct by Foundation, Inc., or its trustees. District Attorney Sam Russell appeals the order of the trial court dismissing his complaint in intervention in an action filed by the City of Fairfield against Foundation, Inc.

On August 6, 1951, the Tennessee Coal, Iron and Railroad Company created an "irrevocable public charitable trust" by transferring certain assets to the seven trustees of "an unincorporated society" known as "The Lloyd Noland Foundation Society." The trust instrument provided: "All assets and property of the trust estate herein created, all additions thereto or substitutions therefor, the proceeds of any sales or other dispositions thereof, and all income therefrom, shall constitute the trust properties and shall be known as `The Lloyd Noland Foundation.'" The trust instrument further provided:

"(3) Said above-named trustees now constitute the entire membership of the unincorporated society known as `The Lloyd Noland Foundation Society'. If the `The Lloyd Noland Foundation Society' should be incorporated under the laws of the State of Alabama as a nonprofit corporation with the same charitable objects, purposes and powers herein stated, said trustees are hereby authorized and empowered by a majority vote of said trustees to transfer and assign the assets of the trust estate created hereunder to such non-profit corporation as successor trustee by instrument providing that such trust estate shall forever be devoted and used for one or more of the charitable uses and purposes herein stated, provided:

"(a) The original trustees of said nonprofit corporation shall be the trustees above named or their successors;

"(b) Said corporation shall have the same powers set out above for the trustees of said trust estate and subject to the same limitations above provided for said trustees;

"(c) Successors to the trustees of said non-profit corporation shall be selected in accordance with the provisions made in the next succeeding section hereto for the selection of successor trustees of the said society and of the trust estate hereby created."

On August 29, 1951, the seven trustees of "The Lloyd Noland Foundation Society" incorporated "The Lloyd Noland Foundation, Inc.," a nonprofit corporation ("Foundation, Inc."), in accordance with the requirements of the trust instrument.

On May 26, 1989, at a regular meeting, the trustees of Foundation, Inc., voted to amend and to restate the articles of incorporation under the Alabama Nonprofit Corporation Act, § 10-3A-1 through -225, Ala.Code 1975. On June 6, 1989, the trustees "restated" the articles of incorporation of Foundation, Inc., in accordance with § 10-3A-84, Ala.Code 1975, a provision of the Alabama Nonprofit Corporation Act. In October 1996, upon a vote of the trustees, Foundation, Inc., sold Lloyd Noland Hospital to Tenet Healthcare.

On June 23, 1997, Magnolia Cook and Wyndolyn Cook sued Foundation, Inc., and Tenet Healthcare and asked the trial court to enjoin permanently the sale of Lloyd Noland Hospital to Tenet Healthcare or any other for-profit corporation; to require a full accounting of any and all transactions between Foundation, Inc., and Tenet Healthcare; to do equity and to prevent unjust enrichment of any person or corporation "at the expense of the charitable purposes for which the Foundation[, Inc.,] exists"; to monitor the relationship between Foundation, Inc., and Tenet Healthcare to prevent future efforts by them "to alter the charitable purposes for which the Foundation, Inc.[,] was created"; and to transfer "the assets of the Foundation[, Inc.,] to Jefferson County, Alabama[,] for the operation of its Cooper Green Hospital." Foundation, Inc., moved to dismiss the action on the ground that the Cooks lacked standing to sue.

On March 3, 1998, the City of Fairfield; Larry Langford, mayor of the City of Fairfield; the City of Bessemer; and Quitman Mitchell, mayor of the City of Bessemer, sued Foundation, Inc., and various fictitious parties. They alleged that, since the sale of Lloyd Noland Hospital, the trustees of Foundation, Inc., had engaged in acts of waste and improper expenditure. They asked the trial court to distribute the assets of Foundation, Inc., to the residents of the City of Fairfield. Thereafter, Sam Russell, as an individual and as the District Attorney for Jefferson County, Bessemer Division, together with various parties who are not parties to this appeal, filed complaints in intervention. The distinguishing feature of District Attorney Russell's intervention is that, for one of his claims, he invoked the Quo Warranto Act, § 6-6-540 et seq., Ala.Code 1975, and sought the dissolution of Foundation, Inc. After the trial court granted the interventions, Foundation, Inc., moved to dismiss the claims of the interveners on the ground that they too lacked standing to sue. The trial court consolidated the Cooks' action with the other actions and stayed all the actions pending mediation. The cases remained stayed for months.

After a status conference, the trial court lifted the stay. Some plaintiffs and some interveners voluntarily dismissed, with prejudice, their claims against Foundation, Inc., and Tenet Healthcare. During this time, the Attorney General rejected the Cooks' request that he take action against Foundation, Inc. Thereafter, after a hearing, on January 31, 2000, the trial court dismissed the claims of the Cooks and the City of Fairfield. The trial court reasoned, in pertinent part:

"The Plaintiffs lack standing under the Alabama Nonprofit Corporation Act, Ala.Code § 10-3A-1 et seq. This act is not elective and is mandatory to all nonprofit corporations. Only specially enumerated persons may challenge a decision to sell or transfer real or personal property by a nonprofit corporation. These persons are (A.) a proceeding by a member or director against the corporation (B.) in a proceeding by the corporation, whether representative, or through a receiver trustee or other legal representative, or through members in a representative suit, against the office[r]s or directors of the corporation for exceeding their authority and (c) in a proceeding by the Attorney General, as provided in this chapter, to dissolve the corporation, or in a proceeding by the Attorney General to enjoin the corporation from performing unauthorized acts, or in any other proceeding by the Attorney General. Ala.Code § 10-3A-3 (1994 rep vol).

"As such the plaintiffs are not one of the listed persons or entities authorized to bring suit under the Alabama Nonprofit Corporation Act. The Act therefore being mandatory calls for the dismissal of the action.

"The common law principles of standing do not apply and the plaintiffs have no special interest different from that of the general public. They have no standing to institute or maintain a suit to enforce a public charitable trust. [Stallworth] v. Andalusia Hospital, Inc., 470 So.2d 1158 (Ala.1985)."

Thereafter, in an order clarifying its January 31, 2000, order, the trial court stated, in pertinent part: "In dismissing these consolidated cases, the Court dismissed each and every claim and amended claim, of all plaintiffs, including the intervener plaintiffs, against all defendants based on the grounds raised in defendants' motions." The City of Fairfield and District Attorney Russell filed post-judgment motions, which the trial court heard and denied.

On appeal, the Cooks contend that they, as beneficiaries of the irrevocable charitable trust, have standing to bring an action to enforce the trust. Neither the original trust instrument nor either corporate charter, initial or restated, designates the Cooks, by name or class, as beneficiaries. Foundation, Inc., contends that § 10-3A-21, Ala.Code 1975, deprives the Cooks of standing to sue to enforce the charitable trust.

The Cooks rely on Jones v. Grant, 344 So.2d 1210, 1212 (Ala.1977), wherein this Court held that the beneficiaries of a charitable trust "have a right to maintain a suit to enforce the trust." However, for trusts incorporated as nonprofit corporations, the enactment of the Alabama Nonprofit Corporation Act, §§ 10-3A-1 through 10-3A-225, Ala.Code 1975, in 1984 superseded that right as recognized by Jones, supra. See Carpenter v. McCart, 272 Ala. 471, 131 So.2d 856 (1961), and McAdory v. Jones, 260 Ala. 547, 71 So.2d 526 (1954). The Alabama Nonprofit Corporation Act applies to all corporations organized under the Act and to all "nonprofit corporations heretofore organized under any act hereby repealed, for a purpose or purposes for which a corporation might be organized under this chapter." § 10-3A-3(a)(1) and (2). Section 10-3A-84 of the Act provides for the restatement of articles of incorporation under the Act. "Upon the filing of the restated articles of incorporation, the restated articles of...