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BRADFIELD v. HOSPITAL AUTHORITY OF MUSCOGEE COUNTY et al.
25921.
Injunction. Muscogee Superior Court. Before Judge Davis.
FELTON, Justice.
The proposed project of the Hospital Authority of Muscogee County and the Hospital Authorities Law authorizing it (Code Ann. Cit. 88-18) are not subject to any of the constitutional attacks made thereon in the plaintiff taxpayer's action to enjoin the implementation of the project and the summary judgment in favor of the defendant Authority was properly granted.
Appellant J. P. Bradfield ("Bradfield"), plaintiff below, filed a complaint in the Superior Court of Muscogee County, Georgia, against Hospital Authority of Muscogee County, et al. ("Appellees"), defendants below, alleging that pursuant to the Hospital Authorities Law (Ga. L. 1964, p. 598), as amended, and particularly as amended by Ga. L. 1969, p. 103 (hereinafter sometimes called the "Hospital Authorities Law"), Hospital Authority of Muscogee County (hereinafter sometimes called the "Authority") acting by and through its members had adopted a resolution reciting the existence of an urgent and immediate need in Muscogee County, Georgia, for additional hospital facilities in order to promote and maintain the public health in said county and authorizing and approving: (1) the acquisition by the Authority of St. Francis Hospital (the "Hospital") in Muscogee County from St. Francis Hospital, Inc. (hereinafter sometimes called St. Francis), a Georgia non profit corporation, (2) the construction of extensions, additions and improvements to the hospital at an estimated cost of approximately $5,000,000; (3) the issuance and sale of the Authority's revenue of $5,000,000 to finance, in whole or in part, the cost of said construction; and (4) the leasing of the hospital to St. Francis with the repayment of the principal, interest and redemption premium (if any) on said certificates to be made solely from the revenues derived from the hospital, including the monthly rentals to be made under the lease agreement proposed to be entered into between the Authority and St. Francis. Bradfield prayed that appellees be restrained and enjoined from proceeding with the issuance and sale of said revenue anticipation certificates and from incurring any further expense in connection therewith, from constructing said extensions, additions and improvements to the hospital, and from executing the delivering said promised lease agreement, on the grounds that such actions by the appellees would be and are unconstitutional, illegal, null and void in that they contravene the equal protection and due process clauses of the Fourteenth Amendment of the Constitution of the United States and six distinct provisions of the Constitution of the state of Georgia of 1945.
Appellees filed an affidavit which indicated the religious affiliations of each of the members of its board of directors and simultaneously filed a motion for summary judgment on the ground that there exists no genuine issue of any material fact, that the action of the appellees in adopting said resolution and the proposed action of the appellees contemplated, authorized and directed by said resolution is not unconstitutional, illegal, null and void for any of the reasons stated in the complaint and that the appellees are entitled to judgment as a matter of law.
Upon consideration of written briefs, the Superior Court of Muscogee County entered its order without opinion granting appellees' motion for summary judgment. Within thirty days Bradfield filed a notice of appeal.
On November 14, 1967, pursuant to the provisions of the Hospital Authorities Act, the Board of Commissioners of Muscogee County adopted a resolution creating the Authority, a public body corporate and politic and an agency or instrumentality of the State of Georgia or Muscogce County. The Authority was duly organized and exists for the purpose, among others, of promoting the public health of Muscogee County. The members of the Authority are those individuals who were named as parties defendant below and who are now individual appellees in this court.
St. Francis is a non-profit corporation organized and existing under the laws of Georgia for the purposes, among others, of furthering the cause of religion, education and charity and of constructing, maintaining, conducting and operating a hospital or hospitals and similar facilities for the care of the ill and the diagnosis and treatment of illness. No part of the property of St. Francis nor of its earnings or profits shall ever inure to the benefit of any private person or individual. St. Francis is the present owner, operator and administrator of the hospital. The management and government of St. Francis is vested in a board of directors. This board consists of 19 members and is constituted of individuals who are affiliated with several different religious denominations. Of the 19 directors, six are Methodists, five are Episcopalians, four are Catholics, three are Presbyterians, and one is Jewish.
St. Francis has entered into a management contract with the Third Order of the Sisters of St. Francis of the Diocese of Pittsburgh (hereinafter sometimes called the "Third Order"), a religious order of the Roman Catholic Church which is dedicated to the relief of human suffering and the operation of hospitals, schools and research programs directed toward the betterment of the human spirit, mind and body. Under this management contract, St. Francis has delegated to the Third Order the responsibility for the day-to-day administration of the hospital but has reserved to itself control over all the general policies governing the operation of the hospital. St. Francis has agreed that its board of directors will include not less than two members of the Third Order during the term of said management contract. The management contract specifies that the residence building which is presently located on the hospital grounds shall be available for the exclusive use of the Third Order on a cost free basis and that St. Francis will not establish or approve any policy which shall contravene or interfere with the religious or moral tenets of the Third Order. Either party to the management contract may terminate same upon twelve months' notice in writing to the other party.
On January 20, 1970, the Authority acting by and through its members unanimously adopted a resolution specifying that, following investigation and study, it had determined that there exists in Muscogee County an urgent and immediate need for additional hospital facilities in order to promote and maintain the public health in said county and, by way of providing in part for the fulfillment of such need, the Authority authorized and approved the acquisition by the Authority of the hospital, the construction of certain extensions, additions and improvements thereto substantially in accordance with certain plans and specifications at a cost of not less than $5,000,000, the leasing of the hospital, as extended, added to and improved, to St. Francis for a term of approximately 22 years at a net monthly rental to the Authority sufficient to amortize the principal of and interest and redemption premium (if any) on the moneys to be borrowed by the Authority to finance the cost of said construction, all expenses incidental to such financing and all expenses accruing from year to year in carrying out the proposed lease agreement between said parties, and the sale and issuance by the Authority of its revenue anticipation certificates in the principal amount of $5,000,000 to finance the cost of said construction. The proposed extensions, additions and improvements to the hospital would increase its size to a facility of approximately 288 beds.
Francis might merge into, consolidate with or transfer its assets to another like non-profit corporation. The delivery of the lease agreement to St. Francis is conditioned upon the execution and delivery of a security agreement by St. Francis granting to the Authority, a security interest in the furniture, furnishings, equipment and other personal property located in the hospital or on the hospital grounds. The lease agreement provides an option in favor of St. Francis to purchase the hospital, as added to, extended and improved, at the expiration or sooner termination of the term of the lease agreement, for $100.
The $5,000,000 in principal amount of revenue anticipation certificates will be issued pursuant to the terms of a trust indenture between the Authority and a bank or trust company to be designated and the rents and other revenues received by the Authority from the hospital (including the rents to be received under the lease agreement from St. Francis) will be pledged thereunder as security for the payment of the principal premium (if any) and interest on such certificates. If the proceeds from the sale of said certificates should be insufficient to complete said extensions, additions and improvements to the Hospital, St. Francis has agreed to complete same without delay and to pay any such excess costs of construction. The trust indenture and the certificates issued by the Authority pursuant thereto shall specify that the certificates shall not, directly or indirectly or contingently, obligate the State of Georgia or Muscogee County to levy or pledge any form of taxation whatever there for or in any way constitute a debt or pledge of the faith and credit of the State or said county.
The Authority will also convey the hospital by a deed to secure debt to the bank or trust company named as trustee under the trust indenture to further secure the payment of the certificates.
The lease agreement which the Hospital Authority of Muscogee County proposes to enter into with St. Francis provides that: "[N]o provision of this lease [agreement] shall be construed so as to give rise to a pecuniary liability of the Authority or a charge against its general credit. All obligations of the Authority arising in connection with this lease [agreement] are limited to the proper application of the proceeds of the sale of the certificates [$5,000,000 in principal amount of revenue anticipation certificates], the rent, the revenues, receipts and income of the Project [Hospital]. Muscogee County, Georgia, whose governing authority caused the Authority to be formed and activated is not liable in any way hereunder."
St. Francis will covenant that during the term of the lease agreement it will (at its expense) provide such furniture, furnishings, equipment and other personal property in, on and about the hospital, as is required in order to constitute the hospital a fully furnished and equipped, modern and efficient hospital meeting the accreditation requirements of the Georgia State Department of Public Health.
A complete reading of the record in this case will reveal that there has not been made any covenant, agreement, representation or understanding running from the Authority to St. Francis, directly or indirectly, expressly or impliedly, to the effect that the fee interest or any other interest in St. Francis Hospital will be exempt from ad valorem taxation.
The articles of incorporation of St. Francis specifically provide that "no part of the property of the corporation nor of the earnings or profits thereof shall ever inure to the benefit of any private person or individual."
J. P. Bradfield, appellant in this appeal, enumerates the following errors:
1. The Superior Court of Muscogee County erred as a matter of law in granting appellees' motion for summary judgment by failing and refusing to hold the Hospital Authorities Law (Ga. L. 1964, p. 598, as amended, and particularly as amended by Ga. L. 1969, p. 103), unconstitutional insofar as it purports to authorize the issuance of revenue anticipation certificates by the Authority to finance the extensions, additions and improvements to the hospital for lease to St. Francis Hospital, Inc., since such action will result in the use of "public funds" to engage in a business of a private nature in violation of the equal protection and due process provisions of the Georgia Constitution (Paragraphs II and III of Section I of Article I of the Georgia Constitution of 1945; Code Ann. 2-102, 2-103).
2. The Superior Court of Muscogee County erred as a matter of law in granting appellees' motion for summary judgment by failing and refusing to hold the Hospital Authorities Law (Ga. L. 1964, p. 598, as amended, and particularly as amended by Ga. L. 1969, p. 103), unconstitutional insofar as it purports to extend the tax exemption granted to the Authority and its properties pursuant to Section 88-1803 thereof to the hospital to be leased to St. Francis, since the extension of such an exemption to specific property which is devoted to private purposes violates the equal protection and due process clauses of the Fourteenth Amendment of the Constitution of the United States (Code 1-815).
3. The Superior Court of Muscogee County erred as a matter of law in granting appellees' motion for summary judgment by failing and refusing to hold the Hospital Authorities Law (Ga. L. 1964, p. 598, as amended, and particularly as amended by Ga. L. 1969, p. 103), unconstitutional insofar as it purports to authorize the issuance of revenue anticipation certificates by the Authority to finance the extensions, additions and improvements to the hospital for lease to St. Francis Hospital, Inc., since such action will result in the pledging of the credit of the State of Georgia to the Authority and thence to St. Francis Hospital, Inc., and therefore violates Art. VII, Sec. III, Par. IV of the Georgia Constitution of 1945 (Code Ann. 2-5604).
4. The Superior Court of Muscogee County erred as a matter of law in granting appellees' motion for summary judgment by failing and refusing to hold the Hospital Authorities Law (Ga. L. 1964, p. 598, as amended, and particularly as amended by Ga. L. 1969, p. 103) unconstitutional, insofar as Section 88-1803 of same purports to extend the tax exemption granted to the Authority and its properties to the hospital to be leased to St. Francis since such an extension would not be permissible pursuant to Article VII, Section I, Paragraph IV of the Georgia Constitution of 1945 (Code Ann. 2-5404), which limits those persons to whom tax exemptions may be granted by the General Assembly of Georgia.
5. The Superior Court of Muscogee County erred as a matter of law in granting appellees' motion for summary judgment by failing and refusing to hold the Hospital Authorities Law (Ga. L. 1964, p. 598, as amended, and particularly as amended by Ga. L. 1969, p. 103), unconstitutional, insofar as Section 88-1803 of same purports to extend the tax exemption granted to the Authority and its properties to the hospital to be leased to St. Francis, since such an extension will result in the granting of a donation or gratuity to St. Francis Hospital, Inc., in violation of Article VII, Section I, Paragraph II of the Georgia Constitution of 1945 (Code Ann. 2-5402).
6. The Superior Court of Muscogce County erred as a matter of law in granting appellees' motion for summary judgment by failing and refusing to hold the Hospital Authorities Law (Ga. L. 1964, p. 595, as amended, and particularly as amended by Ga. L. 1969, p. 103), unconstitutional insofar as it purports to authorize the execution and delivery of the proposed lease agreement between the Authority and St. Francis and the issuance and delivery of the revenue anticipation certificates by the Authority since such actions would be in violation of Article VII, Section V, Paragraph I of the Georgia Constitution of 1945 (Code Ann. 2-5801) which prohibits the General Assembly from authorizing any county, municipal corporation, or political subdivision to appropriate money for, or to loan its credit to, any corporation, company, association, institution or individual except for purely charitable purposes.
7. The Superior Court of Muscogee County erred as a matter of law in granting appellees' motion for summary judgment by failing and refusing to hold the Hospital Authorities Law (Ga. L. 1964, p. 598, as amended, and particularly as amended by Ga. L. 1969, p. 103), unconstitutional insofar as it purports to authorize the execution and delivery of the proposed lease agreement between the Authority and St. Francis and the issuance and delivery of the revenue anticipation certificates by the Authority, since such actions would be in violation of Article I, Section I, Paragraph XIV of the Georgia Constitution of 1945 (Code Ann. 2-114) which prohibits moneys being taken from the public treasury, directly or indirectly, in aid of a church, sect, denomination of religionists or sectarian institution.
1. The thrust of appellant's contention with regard to enumerated error 1 is that there is no guaranty that the hospital, after its lease and ultimate sale to the private hospital corporation, will continue to be operated with the public purpose of promoting the public health of the community as its overriding and paramount purpose and no guaranty that the benefit to the private lessee would not be more than an incidental benefit.
". . . [H]ospitals, whether owned directly by a county or city, or by an authority, are designed and intended to serve identical purposes of discharging the governmental obligation to provide for the health of the people." Undercofler v. Hospital Authority of Forsyth County, 221 Ga. 501, 503 (145 SE2d 487); Beazley v. Dekalb County, 210 Ga. 41, 47 (77 SE2d 740). Under the Hospital Authorities Law, this governmental obligation can be discharged by the acquisition of existing hospital facilities, as is herein proposed as well as by the construction of completely new hospitals) and by the sale or lease of the hospital to others, as is also here proposed (as well as by the Hospital Authority's operation thereof). Code Ann. 88-1805 (Ga. L. 1964, pp. 499, 601, as amended). There is no apparent reason why a suitable private corporation would not properly operate the hospital, either as lessee or as owner, so as to likewise promote the public health functions of government.
"In general, the nature of the corporation, as well as its purpose and objects, must be determined from its charter or articles of association . . ." 14 CJS 418, Charities, 2, citing Morton v. Savannah Hospital, 148 Ga. 438, 439 (96 SE 887). Article 3 of the restated articles of incorporation of the hospital states, in part, as follows: "The purposes for which the corporation is organized are to further the cause of religion, education, and charity . . ." (Emphasis supplied.) Article 5 provides: "The corporation has no capital stock and is not organized and shall not be operated for pecuniary gain or profit." (Emphasis supplied.) In paragraph 5 of appellant's complaint it is alleged that ". . . plaintiff does not dispute that lessee (hospital) is operating and will, after the execution and delivery of the proposed lease agreement, continue to operate the hospital in accordance with the provisions of its corporate charter and bylaws." (Emphasis supplied.)
Regarding the control over the hospital's policies after its sale back to the private hospital corporation, although the covenant in the lease to maintain the charitable, non-profit existence of the corporation may or may not have been intended to apply after the sale, we think there is legal, as well as moral, justification for considering such agreement binding thereafter since the taxpaying citizens, through the Hospital Authority, would have operated it thusly up until that time with the intention, and corresponding obligation, that it continue to be thusly operated. Their use of the Authority's organization and method of financing and funding is ample consideration for the agreement. Even if this matter were not contractually guaranteed, however, as a practical matter it can he exercised by the State Department of Health, which has the authority to revoke permits for the operation of hospitals for violation of rules and regulations prescribed by the Department for reasonable minimum requirements for operation, which, presumably, would include the treatment of indigent patients. Code Ann. 88-1906 (Ga. L. 1964, pp. 499, 613). Moreover, failure to operate the non-profit hospital corporation in accordance with the provisions of its articles of incorporation, herein above set forth, would subject the corporation to a loss of its charter by involuntary dissolution. Code Ann. 22-2201 and 22-3108 (Ga. L. 1968, pp. 565, 735, 770).
Hence, under the general taxing power of the county for the purpose of public health, the county could still provide its indigent sick the funds with which to obtain treatment, even if not by contract with the hospital, so that, from the hospital's viewpoint they would no longer be classified as indigents.
Even assuming further, that the hospital should become unable or unwilling to adequately perform its public health role in the community after the private corporation assumes its ownership, neither the State nor any of its subdivisions would sustain a monetary loss therefrom, since the cost of the project will have been fully recovered out of the income from its operation.
Enumerated error 1 is without merit.
2. Enumerated errors 2, 4 and 5 all attack the constitutionality on various grounds of the tax exemptions and exclusions of the Hospital Authority (Code Ann. 88-1803; Ga. L. 1964, pp. 499, 599, as amended), and its revenue anticipation certificates (Code Ann. 88-1808; Ga. L. 1964, pp. 499, 603).
Section 20 (d) of the proposed lease from the Hospital Authority to St. Francis Hospital, Inc. provides that "[t]he lessee will pay, as the same respectively become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Project . . ." (emphasis supplied), and permits the lessee to contest the validity of any such assessments. Since the lease has not yet been executed, no taxes have been assessed, and it can not be determined at this time whether any taxes will be assessed against the project, it is impossible to rule upon the constitutionality of any tax exemptions which may or may not be allowed at some time in the future under the law as it will then exist. At such time as such exemptions or exclusions are actually allowed, appellant, or other taxpayers, can contest their constitutionality under the then-existing law. The allegations to the effect that the Authority is about to enter upon a project that may not be in keeping with the law do not show cause for injunctive relief in favor of the plaintiff as a taxpayer. Stegall v. Southwest Ga. Regional Housing Authority, 197 Ga. 571, 587 (30 SE2d 196).
3. The proposed project would not violate the provisions of Code Ann. 2-5604 (Const. 1945, Art. VII, Sec. III, Par. IV), since revenue certificates issued by a State Authority are not obligations or debts of the State, nor a pledge of the credit of the State, but are a corporate debt of the Authority. Sigman v. Brunswick Port Authority, 214 Ga. 332, 334 (104 SE2d 467) and cit. In accordance with the above, Code Ann. 88-1808 (Ga. L. 1964, pp. 499, 603) provides in part as follows: "The certificates and other obligations of an Authority shall not be, and shall so state on the face thereof, a debt of the city, the county, the State of Georgia, nor any political subdivision thereof, nor of any combination of subdivisions acting jointly as hereunder provided." Enumerated error 3 is without merit.
4. Nor is there here involved any violation of the provisions of Code Ann. 2-5801 (Const. 1945, Art. VII, Sec. V, Par. I), which are, in part, as follows: "The General Assembly shall not authorize any county, municipal corporation or political division of this State, through taxation, contribution or otherwise, to become a stockholder in any company, corporation or association, or to appropriate money for, or to loan its credit to any corporation, company, association, institution or individual except for purely charitable purposes." (Emphasis supplied.) Even assuming that a "purely charitable purpose" does not exist in this case, the Hospital Authority, which is the organization authorized by the General Assembly to administer the funding of the project, is not a "county, municipal corporation or political division of this State." Richmond County Hospital Authority v. McLain, 112 Ga. App. 209 (144 SE2d 565) and cit. Enumerated error 6 is without merit.
5. The proposed project and the law authorizing it are not in contravention of Code Ann. 2-114 (Const. 1945, Art. I, Sec. I, Par. XIV), which provides: "No money shall ever be taken from the public treasury, directly, or indirectly, in aid of any church, sect, or denomination of religionists, or of any sectarian institution." (Emphasis supplied.) The money funding the project comes not from the public treasury, but from the sale of the revenue anticipation certificates of the Authority, which, as hereinabove stated, constitutes a corporate debt of the Authority and not of the State or any of its political subdivisions. Enumerated error 7 is without merit.
The pleadings and affidavit on file show that there is no genuine issue as to any material fact, that appellant is not entitled to the injunctive relief sought and that movant was entitled as a matter of law to the summary judgment granted by the trial court.
Judgment affirmed. All the Justices concur.
Hatcher, Stubbs, Land, & Rothschild, Howell Hollis, King & Spalding, Charles L. Gowen, Pope B. McIntire, Daniel J. O'Connor, Jr., for appellees.
Owens, Littlejohn & Grover, J. Walter Owens, for appellant.
ARGUED JUNE 9, 1970 -- DECIDED JULY 9, 1970.
Friday May 22 16:33 EDT


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