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24739 - Edmund R. Taylor v. Richland Memorial

Davis Adv. Sh. No. 3
S.E. 2d


In The Supreme Court

Edmund R. Taylor, M.D.,

individually, and on

behalf of all others

similarly situated, Appellant,


Richland Memorial

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


William L. Pope, Roy, F. Laney, both of Pope & Rodgers, of
Columbia, for Appellant.
Charles E. Carpenter, Jr., of Richardson. Plowden, Carpenter,
& Robinson, P.A., of Columbia, for Respondent Richland
Memorial Hospital and Harry M. Lightsey, Jr. and M. Craig
Garner, both of McNair Law Firm, of Columbia, for Respondent
Baptist Healthcare System of South Carolina, Inc.
Jay Bender, Susan Drake Dubose, both of Baker,
Barwick, Ravenel & Bender, L.L.P., of Columbia, for
Amicus Curiae Julius Murray.

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.

p. 19


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

summary judgment.

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

1 The circuit court found Richland Memorial's membership in the System would

not violate the stock ownership aspect of Article X, § 11 and Appellant concedes

this is not an issue in this case.

p. 20


(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

constitutional provision.

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).



p. 21