Davis Adv. Sh. No. 3
THE STATE OF SOUTH CAROLINA
In The Supreme Court
Edmund R. Taylor, M.D.,
individually, and on
behalf of all others
similarly situated, Appellant,
Hospital and Baptist
Healthcare System of
South Carolina, Inc., Respondents.
Appeal From Richland County
Marc H. Westbrook, Circuit Court Judge
Opinion No. 24739
Heard June 18, 1997 - Filed January 12, 1998
Finney, C.J.: Edmund R. Taylor, Appellant, appeals the circuit court's
order granting summary judgment in favor of Respondents Richland Memorial
Hospital and Baptist Healthcare System of South Carolina (Baptist). We affirm.
Richland Memorial is a political subdivision of Richland County.
Baptist is a non-governmental, non-profit corporation. Both operate hospital and
health care facilities in Richland County. Richland Memorial and Baptist have
entered into an agreement creating BR Health System, Inc. (System) as a new non-
governmental, non-profit corporation which will take over and operate the hospital
facilities of both parties. Richland Memorial and Baptist will convey substantially
all of their operating assets to the System; Richland Memorial, Baptist, and
Richland County will lease to the System all land and buildings involved in
hospital operations; and Richland County will quitclaim to the System any personal
property owned by Richland County and used to operate Richland Memorial. The
System will pay rent under the leases, assume all financial and other obligations
of Richland Memorial and Baptist, and assume Richland County's obligations for
indigent health care. Richland County Council approved the agreement by
Ordinance No. 044-96HR.
Appellant filed a declaratory judgment action in circuit court to
determine whether the proposed alliance between Richland Memorial and Baptist
is permissible under Article X, § 11 of the S.C. Constitution. All parties filed
summary judgment motions. Following a hearing, the circuit court denied
Appellant's motion for summary judgment and granted the hospitals' motions for
The sole issue before this Court is whether the ordinance approving the
proposed alliance between Richland Memorial Hospital and Baptist Healthcare
violates Article X, § 11 of the South Carolina Constitution?
S.C. Const. art. X, § 11 provides in pertinent part: "Neither the State
nor any of its political subdivisions shall become a joint owner of or stockholder in
any company, association, or corporation."
Appellant contends the agreement creates a joint venture in violation
of Article X, § 11 because under the proposed alliance a governmental body will be
transferring taxpayer assets to a private corporation over which the government
will have a vote but not control of the assets. Appellant reasons that once
Richland Memorial invests substantial assets it will lose absolute control of those
assets which will then be controlled according to the joint operating agreement.
Article X, § 11 prohibits governmental entities from becoming either
1) a joint owner of or 2) a stockholder in a private company, association, or
corporation.1 Not every joint endeavor between a public entity and private business
is constitutionally prohibited. See Gilbert v. Bath, 267 S.C. 171, 227 S.E.2d 177
not violate the stock ownership aspect of Article X, § 11 and Appellant concedes
this is not an issue in this case.
(1976); Chapman v. Greenville Chamber of Commerce, 127 S.C. 173, 120 S.E.
584 (1923). We have approved arrangements where governmental entities leased
assets to private entities without finding a violation of the joint ownership clause.
Johnson v. Piedmont Mun. Power Agency, 277 S.C. 345, 287 S.E.2d 476 (1982);
Gilbert v. Bath, supra; Chapman, supra.
The circuit court held Richland Memorial's involvement with the
System as a lessor of real property, transferor of personal property, or member in
the System does not violate the joint ownership clause. Further, the circuit court
concluded that because Richland County will not be liable for the System's
obligations and the System will not have the powers to tax and to pledge the full
faith and credit of any political entity, this alliance does not create a risk that any
losses will be shifted to the public. We agree. Richland Memorial will not retain
a partial interest in the personal property because it will quitclaim to the System.
The System will have exclusive title to the assets following the transfer. The real
property lease agreement between the System, Richland County, and Richland
Memorial to be executed at closing describes the relationship as that of landlord
and tenant. While Richland Memorial will be represented on the BR System's
board, Richland Memorial will not have control over the System's operations.
The intent of Article X, § was to "prevent the state from entering into
business hazards which might involve obligations upon the public." Chapman,
supra. There is no evidence the proposed alliance will run afoul of this
The circuit court properly found the county ordinance approving the
alliance does not violate Article X, § 11. See Bolt v. Cobb, 225 S.C. 408, 82 S.E.2d
789 (1954)(legislative enactment will not be held unconstitutional unless it is
clearly improper beyond a reasonable doubt).
TOAL, MOORE, WALLER and BURNETT, JJ., concur.