Pratt v. Board of County Com'rs of Thomas County, 50685

• Decision Date: 14 July 1979
• Docket Number: No. 50685,50685
• Citation: 226 Kan. 333,597 P.2d 664
• Parties: John PRATT, et al., Appellants, v. BOARD OF COUNTY COMMISSIONERS OF THOMAS COUNTY et al., Appellees.
• Court: Kansas Supreme Court

Page 664

597 P.2d 664

226 Kan. 333

John PRATT, et al., Appellants, v. BOARD OF COUNTY COMMISSIONERS OF THOMAS COUNTY et al., Appellees.

No. 50685.

Supreme Court of Kansas.

July 14, 1979.

Syllabus by the Court

1. Taxpayers, who sought to enjoin the issuance and sale of general obligation bonds to build a new county hospital authorized by K.S.A. 1978 Supp. 19-18,128, had standing to challenge the validity of a certificate of need in an action brought pursuant to K.S.A. 60-907.

2. K.S.A. 1978 Supp. 19-18,128, which authorizes the issuance of general obligation bonds for the construction of a new county hospital, requires that a certificate of need be obtained from the state planning agency in accordance with the procedures set forth in K.S.A. 1978 Supp. 65-4801 Et seq. A certificate of need granted by a regional planning agency under K.S.A. 65-2a01 Et seq. does not satisfy the requirements of K.S.A. 1978 Supp. 19-18,128.

3. Under K.S.A. 1978 Supp. 65-4815, a certificate of need issued by the state planning agency may not be extended for a period of more than one year beyond the initial period of approval.

Kenneth Clark, of Clark & Shelton, Hill City, argued the cause and was on the brief for appellants.

Sam W. G. Lowe, of Lowe, Starkey, & Wilks, Colby, argued the cause and H. David Starkey, Colby, was with him on the brief for appellees.

PRAGER, Justice:

This is an action brought pursuant to K.S.A. 60-907 by a group of Thomas County taxpayers against their Board of County Commissioners to obtain an injunction against the issuance of general obligation bonds for the construction of a new hospital. The plaintiffs appeal from orders sustaining the defendants' motion for summary judgment, overruling the plaintiffs' motion for summary judgment, and granting an extension of a certificate of need. The controversy, which arose out of the proposed construction of a hospital in Thomas County, was previously before the court in Thomas County Taxpayers Ass'n v. Finney, 223 Kan. 434, 573 P.2d 1073 (1978). This case arose as a result of events which occurred subsequent to that decision.

Certain facts in the case are not in dispute. They are as follows: In 1938 a county hospital was established in Thomas County by resolution of the board of county commissioners. That year, bonds were issued by the county for the construction of the new hospital in accordance with G.S. 1939 Supp. 19-1854 through 19-1859, which became effective on February 25, 1938. The hospital was completed using the funds obtained from the hospital bonds plus additional funds from the federal government and the Sisters of St. Agnes. The new hospital was leased on October 20, 1941, to the Northwest Kansas Hospital Association, which in turn subleased to the Sisters of St. Agnes on October 21, 1941. The Sisters of St. Agnes operated the hospital until October 10, 1973. At that time the lease was terminated and the hospital reverted to Thomas County. The board of county commissioners appointed a board of trustees, pursuant to K.S.A. 19-1803, to take over management and operations of the hospital.

Early in 1976, the hospital board of trustees decided that it would be for the best interests of the people of Thomas County for a new hospital to be constructed on a different site. The board of trustees entered into an agreement with Hospital Management Corporation, a Delaware corporation, for it to provide professional management of the hospital and also to assist the board of trustees in getting the new hospital constructed. In order for a hospital to be constructed, a certificate of need was required by the Regional Health Programs Act (then K.S.A. 65-2a01 Et seq.). Pursuant to that act, a request for a certificate of need was presented on April 28, 1976, by Hospital Management Association and James D. Daher, as administrator of the hospital, to the Far Northwest Region Health Planning Council. The request for a certificate of need was approved the next day, April 29, 1976. On May 3, 1976, the hospital trustees, acting under K.S.A. 19-1878, certified to the Thomas County Board of Commissioners that funds in the amount of $3,760,000 were needed to build, furnish, and equip a new hospital. That same day, the board of county commissioners passed a resolution authorizing and directing notice to be given to the electorate of Thomas County of the intention to issue bonds to provide the necessary funds to build and equip a hospital in accordance with K.S.A. 19-1878. Protests filed were sufficient to require the question of issuing bonds to be voted on by the electorate of Thomas County. The election was held on November 2, 1976. A majority of the voters voted in favor of the bonds.

On January 5, 1977, a number of Thomas County taxpayers filed an action for an injunction to enjoin the issuance and delivery of the bonds. The district court granted the defendants' motion for summary judgment and the taxpayers appealed to the Supreme Court. That appeal was decided in Thomas County Taxpayers Ass'n v. Finney, 223 Kan. 434, 573 P.2d 1073. This court determined that K.S.A. 19-1878 did not provide the statutory authority to authorize the board of commissioners to issue general obligation bonds for the construction of an entirely New hospital on a New Site. The court concluded that the legislature, by the enactment of K.S.A. 19-1878, intended the statute to provide a method of supplementing an existing bond issue or tax levy which is found to be insufficient for its original purposes. The case was reversed with directions to the district court to enter judgment in favor of the plaintiff taxpayers.

The opinion in that case was filed on January 21, 1978, at which time the 1978 legislature was in session. At the request of Thomas County officials, the Kansas legislature enacted section 1, of chapter 99, 1978 Session Laws, now found in K.S.A. 1978 Supp. 19-18,128. The new statute specifically authorizes the issuance of general obligation bonds for the purpose of constructing, equipping, and furnishing a New county hospital building or facility, separate and apart from an existing county hospital. The mandate in the first case was filed for record in the district court of Thomas County on March 27, 1978.

At this point, the board of trustees and the board of county commissioners, now having statutory authority for the issuance of bonds to construct a new hospital, determined to proceed with their plans to construct a new hospital in Thomas County. Their first concern was to be certain there was in existence a valid certificate of need, which was required by K.S.A. 1978 Supp. 19-18,128 before an election could be held for approval of the issuance of hospital bonds. It should be noted that the board relied upon the certificate of need for hospital construction which had previously been issued by the Far Northwest Regional Planning Council on April 27, 1976. In the course of the litigation in the first case, Dwight F. Metzler, Secretary of the Department of Health and Environment, on March 7, 1977, under the authority of K.S.A. 1978 Supp. 65-4815, extended the certificate of need issued for St. Thomas Hospital for a period of twelve months beyond its expiration date of April 28, 1977. On October 12, 1977, the Department of Health and Environment advised the hospital trustees that the department considered that "the clock would stop for that period of time during which litigation is being resolved and that the department considered that the clock stopped on the certificate of need on January 4, 1977, (When Taxpayers v. Finney Was filed) and would not be restarted until that suit was resolved." The department then advised on March 22, 1978, that the certificate of need had been extended to February 3, 1979. On October 5, 1978, the Department of Health and Environment apparently had a change of mind in regard to its authority to extend a certificate of need beyond the one-year period authorized by K.S.A. 1978 Supp. 65-4815. On that date, the director of the department wrote a letter to the administrator of St. Thomas Hospital advising him that the department could not administratively stop the clock because of pending litigation and that authority for such an extension would have to be determined by the district court. The board of trustees and the board of county commissioners concluded that the original certificate of need continued to be a valid certificate of need sufficient to provide authority for the construction of a new hospital.

On July 3, 1978, pursuant to K.S.A. 1978 Supp. 19-18,128, the board of county commissioners, by resolution, authorized the submission to the electorate of the proposition to issue $3,925,000 in general obligation bonds for the purpose of constructing, equipping, and furnishing a new county hospital separate and apart from the existing facility. In calling this election, the board relied on the assurance of the Kansas Department of Health and Environment that the certificate of need, previously issued, was valid and subsisting. On August 1, 1978, the bond election was held with a vote of 1,787 in favor of the issuance of the bonds and 983 opposed. The board of county commissioners thereafter published notice of the proposed sale of general obligation bonds to be conducted on September 13, 1978. On September 12, 1978, the day before the scheduled bond sale, this action was filed in which the plaintiffs, as taxpayers, sought to enjoin the issuance and delivery of the general obligation bonds. The basis of the plaintiffs' action was (1) that the defendants did not have a valid certificate of need as required by K.S.A. 1978 Supp. 19-18,128, and (2) that no license had been issued for the new county hospital as required by K.S.A. 1978 Supp. 65-4802. Both of the parties filed motions for summary judgment. The trial court sustained the defendants' motion for summary judgment, overruled the plaintiffs' motion, and dismissed the action on the...