W. A. Foote Memorial Hospital, Inc. v. Kelley
| Decision Date | 17 October 1973 |
| Docket Number | No. 54017,54017 |
| Parties | W. A. FOOTE MEMORIAL HOSPITAL, INC., a nonprofit corporation, Plaintiff, City of Jackson, a municipal corporation, Plaintiff-Appellant and Cross-Appellee, v. Frank J. KELLEY, Attorney General of the State of Michigan, Intervenor-Appellee, and City of Jackson Hospital Authority, a Public Corporation, and Lawrence L.Bullen, an Individual and Chairman of its Board of Commissioners,Defendants- Appellees and Cross- Appellant. * |
| Court | Michigan Supreme Court |
City of Jackson by C. Edwin Carraher, City Atty., Jackson, for plaintiff-appellant and cross-appellee; Domke, Marcoux, Allen & Beaman by John H. Schomer, Jackson, of counsel.
Frank J. Kelley, Atty. Gen. of the State of Michigan, Robert A. Derengoski, Sol. Gen., Maxine Boord Virtue, Milton I. Firestone, Edwin M. Bladen, Asst. Attys. Gen., Lansing, City of Jackson Hospital Authority and Lawrence L. Bullen, an Individual and Chairman of its Board of Commissioners by Rosenburg, Painter, Stanton, Bullen & Nelson, Jackson, for defendants-appellees and cross-appellant.
Warner, Hart & Morgan by Robert H. Warner, Gen. Counsel, Lansing, for amicus curiae Michigan Hospital Association; Miller, Canfield, Paddock & Stone by George T. Stevenson, and Charles L. Burleigh, Jr., Dickinson, Wright, McKean & Cudlip by Milton M. Thompson, Detroit, of counsel.
Before the Entire Bench.
In 1969, the legislature enacted 1969 P.A. 38, amended by 1970 P.A. 142 (effective August 1). This is the Hospital Finance Authority Act, M.C.L.A. § 331.31 et seq.; M.S.A. § 14.1220(1) et seq. The title sets forth the legislation as designed
'. . . to create a state hospital finance authority to lend money to nonprofit hospitals for capital improvements; to provide for the incorporation of local hospital authorities with power to construct, acquire, reconstruct, remodel, improve, add to, enlarge, repair, own, lease and sell hospital facilities; to authorize the authorities to borrow money and issue obligations and to enter into loans, contracts, leases, mortgages and security agreements which may include provisions for the appointment of receivers; to exempt obligations and property of the authorities from taxation; and to provide other rights, powers and duties of the authorities.'
§ 2 states the legislative purpose:
'. . . for the benefit of the people of the state and the improvement of their health, welfare and living conditions, it is essential that hospitals within the state be provided with appropriate means to expand, enlarge and establish health care, hospitals and other related facilities; and that it is the purpose of this act to provide a method to enable hospitals in the state to provide the facilities and structures which are sorely needed to accomplish the purposes of this act, all to the public benefit and good, to the extent and manner provided herein.'
The act is divided into four chapters. The first (§§ 1--3) contains the title, legislative purpose, and definitions.
The second (§§ 11--16) creates and empowers the state Hospital Finance Authority, 'a public body and politic of the state' (§ 11).
Chapter 3 authorizes the incorporation of
'a local hospital authority . . . for the purpose of constructing, acquiring, reconstructing, remodeling, improving, adding to, enlarging, repairing, owning and leasing Hospital facilities for the use of any Hospital within or without the boundaries of the incorporating unit.' (Emphasis added.) (§ 21)
§ 26 provides that the local authority 'is a public body corporate' which may 'generally do and suffer to be done all things necessary for and convenient and incident to the carrying out of the purposes of its incorporation.' § 27 lists some powers of the local authority which include the ability to 'enter into lease or lease-purchase agreements with any hospital for the use of the hospital facilities.' §§ 28--32 permit the local authority to borrow money or issue negotiable bonds 'for the purpose of defraying the project costs of hospital facilities.' § 33 states that when all bonds so issued are retired, the authority 'may convey the title to the hospital facilities to the lessee hospital or organization authorized to operate a hospital in accordance with any agreement executed between the local authority and the lessee hospital.'
Chapter 4 lists obligations, liabilities and characteristics of the authorities not otherwise covered in chapters 2 and 3. The act closes with the following command:
'This act, being necessary for an to secure the public health, safety, convenience and welfare of the citizens of the state, shall be liberally construed to effect the public purposes hereof.'
This we shall do within constitutional and legal limitations.
The present controversy arose when the City of Jackson sought to utilize the provisions of Act 38. W. A. Foote Memorial Hospital, (hereinafter designated as Foote Hospital) is owned by the city and operated pursuant to § 78 of the city charter. Part of the hospital facility makes use of land deeded to the city in 1916 by Ida W. Foote. Daily control of the hospital is exercised by a Board of Hospital Managers. The charter allows one mill of the city property tax to be appropriated for the hospital, although most patients are not city residents. These funds are primarily used to assist in meeting obligations incurred by the issuance in 1958 of general obligation bonds to raise capital needed for expansion and improvement of hospital facilities.
With the inevitable increase in the demand for hospital services and the increased difficulty in raising funds, the city began to investigate means whereby additional money could be raised. Despite the best efforts of the city and the hospital managers, the search uncovered no available source of funds. The city is thus without the financial means to remedy overcrowded conditions and to provide needed emergency room, laboratory and other facilities.
When Act 38 was passed, the hospital managers unanimously decided to utilize its provisions to meet the increasingly urgent need for expanded and improved facilities. Negotiations between the managers and the city produced an agreement whereby the city would transfer the property and assets of Foote Hospital to a local hospital authority organized under Act 38. The authority in turn would lease the facilities to W. A. Foote Hospital, Inc., a nonprofit, nonpublic corporation organized specifically for this purpose and eventually would transfer all right, title and interest in the property and assets to the nonprofit corporation.
Under the agreement, the local authority was to assume existing liabilities and debts of the city which resulted from operation of the hospital and from the general obligation bonds. The local authority was to pay $250,000 when the agreement was signed and, ten years after, pay $25,000 per year for 30 years. The local authority was to relinquish all claims to the one mill appropriation. Subject to the restrictions of Act 38, the local authority was empowered to assign its rights or convey title to the nonprofit corporation which would be leasing and operating the facilities. The managers and the city agreed that this process was best suited to serving and preserving the public health and welfare.
On September 15, 1970 the city commission elected a five member local hospital authority. On December 11, 1970 the authority declined to execute and carry out the agreement. This decision resulted from questions raised by interested parties concerning the constitutionality of the act and the proposed transfer.
The city filed a complaint for declaratory judgment in the Jackson County Circuit Court on December 14, 1970 which sought a determination of the act's constitutionality. It also sought an order compelling the local authority to execute and carry out the Agreement. 1
In its answer the authority contended that the statute authorizing its creation was unconstitutional. It further alleged the insufficiency of consideration for the transfer and various violations of the state constitution if the transfer were to occur.
Both plaintiffs (August 6, 1971) and defendants (August 16, 1971) moved for a summary judgment claiming there was no genuine issue as to any material fact. The Attorney General intervened on August 12, 1971 opposing the proposed reorganization and transfer. He moved for summary judgment on October 29, 1971. A 'Complaint of Intervenor in Quo Warranto' was filed on May 19, 1972. On May 23, 1972, the Attorney General again filed an intervention and appearance, this time on behalf of the 'uncertain and indefinite beneficiaries of an inter vivos and testamentary charitable trust of Ida W. Foote and indefinite beneficiaries of the W. A. Foote Hospital, Inc., a charitable trust under Act 101 of the Public Acts of 1961, as amended.'
This controversy includes the status of the warranty deed executed by Ida W. Foote on September 5, 1916 which conveyed land to the City of Jackson with the provision:
'. . . that no part of said described property shall at any time be used for any purpose other than that of a city hospital, and in case of violation of this covenant said described premises shall revert to the said Ida W. Foote, her heirs, executors, administrators and assigns.'
The Attorney General claims that the deed constituted a charitable trust.
In the meanwhile, an executive message dated March 22, 1972 requested that pursuant to GCR 1963, 797 this Court consider the constitutionality of Act 38. Such procedure is permitted if the question is 'of such public moment as to require early determination.' On April 7, 1972 the request was denied 'without prejudice to recertification to this Court by the Governor after the trial court had decided the central issue of the constitutionality of the Act.'
The opinion of the trial court was filed August 14, 1972. 2
On October 18, 1972, the trial...
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