Turpen v. Rabun County Board of Commissioners
Turpen v. Rabun County Board of Commissioners
Concurring Opinion
concurring specially.
An old and wise saying tells us that hard cases make bad law. This is just such a “hard case,” as was Sparks v. Hosp. Auth. of the City of Bremen &c., 241 Ga. App. 485, 490 (526 SE2d 593) (1999). Although I agree with the result in this case, I cannot agree with the reasoning or all that is said in the majority opinion.
The lease agreement here cannot be distinguished in any meaningful way from that in Sparks. Yet the majority, authored by the author of Sparks, treats them as very different. In Sparks, this court stated that the parties there “agreed to the terms and the conditions of the transaction, but agreed that it would not be effective until the Attorney General approved the agreement.” (Emphasis supplied.) Id. at 486 (1). Now, however, the majority distinguishes this case from Sparks by saying that Sparks “took effect immediately, regardless of the contingency provision,” majority opinion at 197, and that such an agreement “effectively transfers ownership, operation or control of the hospital” at the time it is signed. Majority opinion at 197.
As I indicated in my special concurrence in Sparks, I am concerned about the flaws, both ambiguities and omissions, in the Hospital Acquisition Act, OCGA §§ 31-7-400 through 31-7-412. It is entirely possible, in my view, that it is these flaws that have led to the majority’s strained analysis.
Opinion of the Court
Citizens of Rabun County sued the county and Rabun County Hospital Authority to enjoin the county’s purchase of a nonprofit hospital’s assets on several grounds, including that the county failed to comply with the Hospital Acquisition Act, OCGA § 31-7-400 et seq. The trial court found the law inapplicable. After the citizens appealed, the sale was finalized. The citizens enumerate only one error, that the court erred in holding that the transaction was not governed by the Act.
Enacted in 1997, the Georgia law prohibits an “acquiring entity” from purchasing or leasing a hospital from a nonprofit corporation and prohibits a nonprofit corporation from selling or leasing a hospital to an acquiring entity, without first providing detailed notice to the Attorney General of the proposed transaction. OCGA §§ 31-7-400; 31-7-401. The Attorney General must publish notice of the proposed transaction and later hold a public hearing “to ensure that the public’s interest is protected ... by requiring full disclosure of the purpose and terms of the transaction and providing an opportunity for local public input.” OCGA §§ 31-7-404 to 31-7-406. By statute, the transaction is not in the public interest,
unless there has been adequate disclosure that appropriate steps have been taken to ensure that the transaction is authorized, to safeguard the value of charitable assets, and to ensure that any proceeds of the transaction are used for appropriate charitable health care purposes.
OCGA § 31-7-406.
The Act also provides that any transaction made in violation of
On April 2, 1999, Rabun County entered into a “Sales Contract” with The Woodlands Foundation, Inc. for the purchase of 7.68 acres of land, buildings and equipment that included two hospitals known as Woodridge Hospital and Ridgecrest Hospital and a business known as Mountain Home Health.
On May 8, 1999, certain citizens filed suit to stop the purchase and cancel the lease, raising two alleged violations of the state constitution, a claim that the transaction was a waste of county tax dollars and a claim that it violated the Hospital Acquisition Act. The citizens contend that the county paid too much for the assets.
On May 21,1999, Woodlands, Rabun County, and Rabun County Hospital Authority jointly filed notice under the Act and paid the required $50,000 fee. See OCGA § 31-7-402 (a), (c). The applicants identified the Sales Contract and the lease as the applicable contracts. In its cover letter, Woodlands argued to the Attorney General that the law did not apply because the transaction involved two nonprofit entities. The Attorney General disagreed and told Woodlands that the application was incomplete in other respects.
On June 1, after a hearing, the court granted a preliminary injunction based on one of the constitutional arguments, a finding that the Hospital Acquisition Act was applicable to the lease and a determination that its requirements had not been met. The court enjoined the county from operating the facilities “until such time as the proceedings before the Attorney General have been completed.” Rabun County then terminated the lease. The citizens moved for a permanent injunction.
On July 28, Woodlands wrote to the Attorney General arguing that the Act was not applicable to the Sales Contract because the county was the acquiring entity and counties are not subject to the law. The Attorney General again disagreed. Woodlands offered a third argument — that the Act did not apply because the proceeds of
Rabun County then sought to dissolve the preliminary injunction and obtain validation of the revenue bond necessary to pay for the purchase. After a hearing, the court agreed with the Attorney General, dissolved its preliminary injunction, validated the bond and entered final judgment against the citizens on all counts. The final order was entered on September 13, 1999, and an appeal taken immediately. On November 16, 1999, the sale transaction closed, and the proceeds were disbursed by the trustee in bankruptcy as per the order of the bankruptcy court. The record indicates that as of October 6, both hospitals remain closed and that it would take several months to reopen them because of certification requirements and necessary improvements.
1. Rabun County and the hospital authority have moved to dismiss the appeal on the grounds that the appeal is moot because the transaction has already occurred. The Supreme Court has recently restated the definition of mootness: “a case is moot when its resolution would amount to the determination of an abstract question not arising upon existing facts or rights . . . [but] a case which contains an issue that is capable of repetition yet evades review is not moot. . . .” Collins v. Lombard Corp., 270 Ga. 120, 121 (1) (508 SE2d 653) (1998).
The citizens sought an injunction prohibiting the sale and a declaration that the lease and sale by Woodlands to the county and hospital authority be declared void as a matter of law. Although the question of injunctive relief, per se, is moot,
The Act provides that “acquiring entity” means
an individual, business corporation, general partnership, limited partnership, limited liability company, limited liability partnership, joint venture, nonprofit corporation, hospital authority, or any other for profit or not for profit entity which is a purchaser or lessee of an acquisition.
OCGA § 31-7-400 (1). The citizens argue that the definition is broad enough to include counties, either under the term “hospital authority” or under the final phrase “any other for profit or not for profit entity. . . .” We agree that the catchall phrase is broad enough to include Rabun County in the transaction at issue in this case.
Under Georgia law, a county and a hospital authority are two separate and distinct entities, both of which are authorized to own, operate and lease hospitals. Several statutes show this to be true.
However, Rabun County is included under the broad catchall provision: “any other for profit or not for profit entity which is a purchaser or lessee of an acquisition.” OCGA § 31-7-400 (1). Taken as a whole, we read § 31-7-400 (1) to include any other entity of the same kind or category as those specifically enumerated.
The longstanding rule of construction known as ejusdem generis
Here, the county has purchased the assets of two hospitals for the specific purpose of using them to operate a hospital. As stated in the county’s brief, “Rabun County proposed to purchase the Woodlands Foundation, Inc. hospital facilities, and to lease those facilities to the Hospital Authority of Rabun County for operation.” Based on this undisputed fact, Rabun County is an “acquiring entity” under the Act.
Construing the Act so that counties that intend to operate hospitals acquired from nonprofit corporations are not included would undermine some of the major policies underlying the Act. “When interpreting a statute we are required to look for the intent of the legislature and construe statutes to effectuate that intent.” (Citation and punctuation omitted.) G.I.R. Systems v. Lance, 219 Ga. App. 829, 832 (3) (466 SE2d 597) (1995). In response to a dramatic increase during the 1990s in the number of conversions of nonprofit hospitals to for-profit entities, many states passed legislation designed to protect the public’s interest in these transactions.
Thus, among other things, the General Assembly clearly intended to provide: public disclosure of nonprofit hospital dispositions; an assurance that nonprofit corporations are receiving fair value and that the transactions are free from conflicts of interest; oversight by the public and the Attorney General of disposition of the proceeds collected by the nonprofit corporation and assurance of continued access to health care for the community including the needy. Most of these interests would be lost if counties are not included in the definition of “acquiring entity.”
3. On April 2, 1999, when the county and Woodlands entered into the Sales Contract, and on May 21, when they submitted notice under the Act, Ridgecrest Hospital had a hospital permit — and therefore was a hospital as defined in the Act. OCGA § 31-7-400 (8). The county and the hospital authority contend that if a nonprofit gives up its hospital permit while the sale of the hospital assets is pending, the transaction is no longer subject to the Act. We do not agree that such a loophole exists under the Act and find instead that
As stated above, the General Assembly clearly intended to provide for oversight of disposition of the proceeds collected by the nonprofit corporation, knowing that these nonprofit corporations would be getting out of the hospital business, i.e., many would be turning in their permits as a matter of course. Therefore, allowing a nonprofit corporation to escape application of the Act by relinquishing its hospital permit after it has entered into an agreement covered by the Act would be inconsistent with the legislative intent.
OCGA § 31-7-400 (8) cannot be construed to mean that a nonprofit corporation with a hospital permit as of the date of an agreement to sell or as of the date of the original notice provided under the Act may simply turn in its permit to avoid application of the Act. For the remainder of the life of the proposed transaction or the public review process provided by the Hospital Acquisition Act, a hospital is a hospital for the purposes of the Act.
4. The citizens also argue, based on Sparks v. Hosp. Auth. of the City of Bremen &c., 241 Ga. App. 485, 488-489 (2) (526 SE2d 593) (1999), that the county and authority violated the Act as of April 2, 1999, the date they entered into the Sales Contract and lease.
But in Sparks, there was only one agreement that provided that Tanner would lease most of the real property of the hospital, purchase most of the personal property and operate the hospital. Even though the agreement provided that it would not be consummated until after the Attorney General approved the transaction, it also stated that it “became a legally binding obligation on the parties effective immediately upon execution and delivery. . . .” Thus, it took effect immediately, regardless of the contingency provision, and therefore violated the intent of the Act to provide notice in advance of consummation of a transaction.
Here there were two separate agreements, a sales contract and a lease. The lease agreement violated the Act as of the day it was signed because it went into effect that day and notice had not been provided under the Act. The trial court so held on June 1,1999. Thus, the lease agreement was null and void under the Act. OCGA § 31-7-412 (a). However, the “Sales Contract” dated April 2,1999, was a typical real estate contract that provided that the sale would close months later, i.e., the sale would be consummated at the time of closing. The notice provided on May 21, 1999, was more than 90 days in advance of September 1, 1999, the proposed closing date, and therefore in accord with the Act.
5. In summary, we reverse the trial court’s holding that the Act is not applicable to the transaction. Our decision renders the transaction null and void. OCGA § 31-7-412 (a). From a practical standpoint, it may be impossible to undo the transaction. Because we do not have all the facts related to the consummation of the transaction, we leave that issue to the trial court.
Judgment reversed.
At the time, Rabun County, through the Rabun County Hospital Authority, already operated one hospital — Rabun County Memorial Hospital.
The filing of a notice of appeal in injunction cases does not serve as a supersedeas. Citizens to Save Paulding County v. City of Atlanta, 236 Ga. 125 (223 SE2d 101) (1976). When the injunctive relief sought by appellants cannot be granted, the appeal is moot. Brown v. Spann, 271 Ga. 495, 496 (520 SE2d 909) (1999).
OCGA § 31-6-47 (a) (9) distinguishes between hospitals owned by political subdivisions of the state and hospital authorities. OCGA § 31-7-51 (a) (8) and (9) define “publicly operated” and “publicly owned” medical facilities as those operated or owned by a “county, municipality, hospital authority, or any combination thereof.” OCGA § 31-7-75.1 establishes irrevocable trust funds for the net proceeds of the sale or lease of a hospital by both hospital authorities and political subdivisions of the state. OCGA § 31-7-85 provides that counties and cities may contract with hospital authorities, and the contracts may provide for the sale or lease of hospitals to authorities. OCGA § 31-7-86 refers to the sale or lease of property by cities or counties to authorities. OCGA § 31-14-14 provides certain immunity for certain officials who are employed in hospitals including, among others, those operated by the state, a political subdivision of the state or a hospital authority. OCGA § 36-60-7 makes plain that counties and municipal corporations may build and equip hospitals directly or indirectly, through a hospital authority.
Kevin F. Donohue, Crossroads in Hospital Conversions — A Survey of Nonprofit Hospital Conversion Legislation, 8 Ann. Health L. 39, 42 (1999).
Id., citing Phillip P. Bisesi, Comment, Conversion of Nonprofit Health Care Entities to For-Profit Status, 26 Cap. U. L. Rev. 805, 820 (1997).
Rachel B. Rubin, Comment, Nonprofit Hospital Conversions in Kansas: The Kansas Attorney General Should Regulate All Nonprofit Hospital Sales, 47 Kan. L. Rev. 521 (1999).
See OCGA § 31-7-89.1 for application of the Hospital Acquisition Act to sales by a hospital authority.
Reference
- Full Case Name
- TURPEN Et Al. v. RABUN COUNTY BOARD OF COMMISSIONERS Et Al.
- Cited By
- 11 cases
- Status
- Published