Heiner v. City of Mesa
| Decision Date | 01 November 1973 |
| Docket Number | CA-CIV,No. 1,1 |
| Citation | 21 Ariz.App. 58,515 P.2d 355 |
| Parties | Lee HEINER, William Stuart Wunch, Zane W. Merkley, Bruce Jay Hancock, W. Vaughn Ellsworth, James G. Papik and Dr. Philip F. Hartman, Appellants, v. The CITY OF MESA, Jack J. Taylor Wayne G. Pomeroy, Eldon Cooley, Bert Freestone, William G. Wright, Lee Roy Kellis, George Bliss and J. W. Petrie, Southside District Hospital, Good Samaritan Hospital, W. D. Pew, Raymond L. Reussell, Arthur L. Livingston, Manuel Matta, H. Richard Poyntner, Richard E. Skousen, Scott Parker and Clara B. Emmett, Appellees. 2047. |
| Court | Arizona Court of Appeals |
The appellants were the plaintiffs in the trial court. The appellees were the defendants. The trial court rendered a summary judgment in favor of the defendants and the plaintiffs have appealed therefrom.
While there are other issues which will be discussed, the main issue involves the application of § 7 of Article 9 A.R.S. of our Constitution which reads as follows:
' § 7. Gift or loan of credit; subsidies; stock ownership; joint ownership
Section 7. Neither the State, nor any county, city, town, municipality, or other subdivision of the State shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the State by operation or provision of law.'
There is an interesting procedural matter which will be discussed first.
There were two depositions of the defendant Scott Parker. There were 33 exhibits marked in connection with the first deposition. The trial court's judgment recites that the court took depositions into consideration. There were two separate designations of records on appeal. One called for the two Parker depositions and one called for the 33 exhibits. When the records reached this Court the depositions were not among the papers so received nor were there papers that could be readily identified as the 33 exhibits.
After inquiry by this Court, it was determined that the depositions were used by the trial court in reaching its conclusion on the motion for summary judgment but that the depositions had not been filed of record in the Superior Court. Unfortunately, this is a situation that this Court has observed more than once. This Court honored a stipulation to enlarge the record to include the depositions. There were no exhibits attached to either deposition. An examination of the first deposition disclosed that at the conclusion of the taking thereof all of the exhibits were surrendered into the possession of the attorney for the plaintiffs for his study. The exhibits were then returned to the defendant who produced them and they were to be available at the trial of the case.
Copies of two of the deposition exhibits were attached to the plaintiffs' original complaint. Seven of the deposition exhibits were produced in support of the defendants' motion for summary judgment and in the Superior Court file they were marked with numbers which correspond with the numbers assigned to them at the time of the taking of the deposition. Thus, it appears that the trial court and this Court have the advantage of the depositions and of those exhibits which both sides of the controversy felt were material to the motions for summary judgment.
It should also be noted that in addition to the granting of the defendants' motion for summary judgment the trial court denied the plaintiffs' motion for a partial summary judgment.
A portion of the background of this controversy is recorded in the case of South Side District Hospital v. Hartman, 62 Ariz. 67, 153 P.2d 537 (1944), which case will hereinafter be referred to as the Hartman case. In the Hartman case, the appellee is the same doctor of osteopathy who is an appellant in the case at bar.
In 1923 the City of Mesa acquired 10.9 acres of land on which were some improvements. This land and the physical improvements thereon will be referred to as the property in question (PIQ). Shortly after acquiring the PIQ, Mesa leased 1 the same to Southside District Hospital (Southside), the appellant in the Hartman case and one of the appellees now before this Court.
Although the word District appears in the name of Southside, it is not a hospital district within the contemplation of A.R.S. §§ 36--1231 to 1248. The word 'District' refers to a geographical area that Southside was formed to serve. This area includes the Cities of Mesa, Tempe, Chandler, Gilbert and Lehi, together with the surrounding community. Southside at all times has been a non-profit corporation formed to operate, and operating as its sole function, the hospital rendering services to the people of the area it was intended to serve.
After the 1923 lease there was a series of similar leases, one of which was upheld by our Supreme Court in the Hartman case. One of the considerations which entered into the Supreme Court's decision upholding the lease was the 1942 enactment of a statute which is now A.R.S. § 9--242. 2
One of the features of the leases, a feature considered in the Hartman case, was the privilege of Southside to accumulate a reserve fund. See 62 Ariz. at 73, 153 P.2d at 539. This fund could be used for capital improvements of the structures, which improvements became the property of Mesa. The fund could also be used for the purchase of hospital equipment, which became the property of Southside. The trial court in the Hartman case held that the income derived from the operation of the hospital was the property of the City of Mesa. This holding was vacated by the Supreme Court by its erversal of the trial court.
Following the 1944 decision in the Hartman case, the arrangement continued. The PIQ was improved by the use of reserve funds, by the use of gifts, and by federal grants. One of the series of leases was a 15-year lease which was entered into on 30 October 1956. (Exhibit B to the Complaint being Deposition Exhibit 5). 3 Late in 1964 the Board of Trustees of Southside decided to secure a survey of the hospital and the community needs. (Exhibit 12) A report, known as the Hamilton Report, was received in December 1965. (Exhibit 13) Without a detailed recitation of the contents of the report, the report found the existing hospital facilities to be inadequate, and found that the land area contained in the PIQ was inadequate fro expansion. The report urged the acquisition of more land and the construction of a new hospital building.
In 1967 the State Health Department declared that 121 of the 146 beds of Southside were substandard.
As of a date which is not clear to this Court, legislation was prepared and introduced into the Arizona Legislature. Apparently the purpose of the proposed legislation was to enlarge the powers afforded by A.R.S. § 9--242 to include the right to operate an extended care facility. This Court is indefinite in these statements in that the proposed legislation, while an exhibit to the Parker deposition, was not furnished to the trial court and thus not furnished to this Court. The proposed legislation did not pass.
The Southside Board of Trustees and the City of Mesa explored other ways of attempting to finance a new modern hospital to continue this vital community service. In the Hartman case the Supreme Court characterized the efforts to furnish hospital services as a,
'* * * very praiseworthy and laudable object sought by the City of Mesa to be accomplished for the benefit of that community, we think the law (the 1942 statute) should be sustained unless there is some very plain provision in the constitution against it.' 62 Ariz. at 72, 153 P.2d at 539.
An election in the area served by Southside was held in September 1967. The overall vote was against creating a district as a legal entity with bonding authority for the purpose of acquiring more land and building a new hospital.
Other means of reaching the objective of a new and modern hospital were found to be not feasible.
Negotiations were undertaken between Southside and the Good Samaritan Hospital, one of the defendants-appellants before this Court. Good Samaritan is also a nonprofit corporation and has operated a general hospital in the Phoenix area for many years. Mesa through its officials was fully aware of all of these proceedings.
Negotiations came to a head on 13 February 1968. On that date Southside and Good Samaritan issued a joint statement of their intent to merge. (Part of Exhibit 2). Mesa and Southside entered into an agreement (Exhibit A to the Complaint being Deposition Exhibit 7), wherein it was recognized that the reserve fund was approximately one million dollars and that the general public would be best served by a new hospital. It was agreed that Southside would undertake to build and operate a new hospital of equal or greater capacity, meeting all of the necessary hospital standards, that Mesa relinquished all claim, if any it had, to the reserve fund, and subject to final court approval, Mesa agreed to deed the PIQ to Southside.
The present litigation was commenced on 12 June 1968.
On 2 August 1968 the Southside-Good Samaritan merger agreement was executed. (Exhibit 1). Southside was absorbed by Good Samaritan. Some of the members of the Southside Board of Trustees became members of the Board of Good Samaritan. The funds and accounts of Southside...
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