Mercy Hosp. of Williston v. Stillwell, 10683

• Court: United States State Supreme Court of North Dakota
• Writing for the Court: GIERKE; ERICKSTAD; VANDE WALLE
• Citation: 358 N.W.2d 506
• Parties: MERCY HOSPITAL OF WILLISTON, a non-profit domestic corporation, Petitioner, Appellee and Cross-Appellant, v. Lester F. STILLWELL, Personal Representative of the Estate of Erling B. Manger, Deceased, and First Lutheran Church, Respondents, Bethel Lutheran Home for the Aged, Respondent, Appellant and Cross Appellee. Civ.
• Docket Number: No. 10683,10683
• Decision Date: 28 November 1984

Page 506

358 N.W.2d 506 MERCY HOSPITAL OF WILLISTON, a non-profit domestic
corporation, Petitioner, Appellee and Cross-Appellant,
v.
Lester F. STILLWELL, Personal Representative of the Estate
of Erling B. Manger, Deceased, and First Lutheran
Church, Respondents,
Bethel Lutheran Home for the Aged, Respondent, Appellant and
Cross Appellee. Civ. No. 10683. Supreme Court of North Dakota. Nov. 28, 1984.

Richard A. McKennett [argued], of Rolfstad, Winkjer, McKennett, Kaiser, Stenehjem & Walters, Williston, for respondent, appellant and cross-appellee.

Terry P. Lorenz [argued], of McIntee & Whisenand, Williston, for petitioner, appellee and cross-appellant.

GIERKE, Justice.

This is an appeal by Bethel Lutheran Home for the Aged, Inc., [Bethel], a residuary devisee under the will of Erling B. Manger, from a memorandum and order of the County Court of Williams County construing the will. The county court concluded that the residuary devise made to Good Samaritan Hospital Association [Good Samaritan],

Page 507

an entity no longer in existence, had lapsed. It ordered distribution among the three remaining devisees (First Lutheran Church, Mercy Hospital, and Bethel) in proportion to their interests in the residue, pursuant to Sec. 30.1-09-06(2) of the North Dakota Century Code. Mercy Hospital cross-appeals from the memorandum and order, contending that the devise to the nonexistent Good Samaritan facility should pass to Mercy Hospital alone rather than to the three remaining devisees in proportion to their interests in the residue. In the alternative, Mercy Hospital asks this court to affirm the lower court's distribution of the devise pursuant to Sec. 30.1-09-06(2), N.D.C.C. We reverse and remand.

Manger executed a will on November 8, 1968, which directed that his sister, Mildred, receive his personal property. The rest of Manger's estate was placed in trust for Mildred, with the net income therefrom payable to her. Manger's instructions were, upon Mildred's death, to terminate the trust fund and distribute the assets to certain charitable and religious organizations listed under ARTICLES IV and V of his will. According to Paragraph Seventh of ARTICLE V of Manger's will, the residue was to be apportioned as follows:

"SEVENTH: All of the rest, residue and remainder of my estate, I give, devise and bequeath as follows:

"a. Forty percent (40%) thereof to the FIRST LUTHERAN CHURCH, Williston, North Dakota to help defer [sic ] the cost of a new bell tower and equipment.

"b. Twenty percent (20%) thereof to the BETHEL LUTHERAN HOME FOR AGED, Williston, North Dakota.

"c. Twenty percent (20%) thereof to GOOD SAMARITAN HOSPITAL, Williston, North Dakota.

"d. Twenty percent (20%) to MERCY HOSPITAL, Williston, North Dakota."

Manger's will did not provide for a "gift over" to another entity in the event that one of the four residuary devisees ceased to exist at the time of his death.

Good Samaritan was owned by some of the same Lutheran churches located in northwestern North Dakota which owned Bethel. Good Samaritan was an acute medical care facility which also provided some long term nursing care as an accommodation to Bethel. Mercy Hospital is strictly an acute medical care facility.

In the early 1970's, Good Samaritan was experiencing financial difficulty. This was due in part to the economic conditions at the time and also as a result of Mercy Hospital's receipt of a Certificate of Need from the State Health Council for replacing its building. It was inevitable that Good Samaritan would eventually merge with Bethel. An administrator was hired to jointly supervise Good Samaritan and Bethel. The administrator, Wayne Hanson, remains administrator of Bethel.

On June 1, 1972, a preliminary agreement was made between Good Samaritan and Mercy Hospital whereby Good Samaritan's acute care service was transferred to Mercy Hospital. A Memorandum of Agreement was executed which finalized the transfer to Mercy Hospital in April of 1973. Good Samaritan ceased operation as a medical care facility on July 1, 1973.

A plan of merger between Good Samaritan and Bethel was executed on March 11, 1974. The plan was incorporated into the articles of merger which were adopted on March 13, 1980. The plan to merge recited, in pertinent part, that:

"RECITALS

"WHEREAS, the Good Samaritan Hospital Association was organized to own and operate a hospital by the American Lutheran Church, said hospital to be located in Williston, North Dakota, and

"WHEREAS, the corporate existence of the Good Samaritan Hospital Association is no longer practical inasmuch as the hospital which it owned and operated has closed its doors and is no longer located or operated in Williston, North Dakota, or elsewhere, and

"WHEREAS, The Bethel Lutheran Home For The Aged, Inc., is a similar

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non-profit corporation owned and operated by the same American Lutheran Church as those owning the Good Samaritan Hospital Association, and

"WHEREAS, the corporate purpose for the Bethel Lutheran Home For The Aged, Inc., is the care of the aged, elderly and those requiring nursing care desiring to reside in Williston, Williams County, North Dakota, and

"WHEREAS, the purposes and needs of the Bethel Lutheran Home For The Aged, Inc., and the Good Samaritan Hospital Association are similar in nature and of a humanitarian nature, and

"WHEREAS, there may be gifts bequests and legacies which are as of now unknown, but which have been made to the Good Samaritan Hospital Association that could not be claimed by that corporation if it ceases to exist but which would inure to the benefit of the persons to be served and those in need located in Williston, Williams County, North Dakota, thru the Bethel Lutheran Home For The Aged, Inc.

"IT IS THEREFORE RESOLVED and the agreement of the parties hereto that the Good Samaritan Hospital Association should be merged into and become a part of the Bethel Lutheran Home For The Aged, Inc., so that the Bethel Lutheran Home For The Aged, Inc., shall be a surviving corporation and that the corporate existence of the Good Samaritan Hospital Association shall cease, and that the Bethel Lutheran Home For The Aged, Inc., shall become the owner without other transfer of all of the rights and property of the corporations herein and that it shall become subject to all of the debts and liabilities of the constituent corporations in the same manner as if Bethel Lutheran Home For The Aged, Inc., had itself incurred them ...."

Manger's sister, Mildred, moved into Bethel Home in 1974. Manger himself resided there from March of 1977 until his death on June 9, 1982. Lester Stillwell was appointed personal representative of the estate. Manger's will was admitted to formal probate on June 24, 1982, in the Williams County Court.

On July 28, 1983, Mercy Hospital petitioned the Williams County Court for a construction of Manger's will. Mercy Hospital contended that the court should have invoked the cy-pres doctrine and ordered that the residuary devise to Good Samaritan be distributed to Mercy Hospital, the only remaining hospital in the area providing acute medical care. In the alternative, Mercy Hospital asked the court to apply Sec. 30.1-09-06(2), N.D.C.C., thereby distributing the Good Samaritan's devise to the three remaining devisees in proportion to their interests in the residue.

Bethel contended that it was entitled to the devise by virtue of the merger between Bethel...