Trustees of Rex Hospital v. BOARD OF COM'RS

Annotate this Case

79 S.E.2d 892 (1954)

239 N.C. 312

TRUSTEES OF REX HOSPITAL et al. v. BOARD OF COM'RS OF WAKE COUNTY et al.

No. 457.

Supreme Court of North Carolina.

January 29, 1954.

*901 Paul F. Smith, Raleigh, for appellant City of Raleigh.

*902 Thomas A. Banks, Raleigh, for appellants Board of Commissioners of Wake County, with William Henry Hoyt, New York City, of counsel, and Armistead J. Maupin, Raleigh, guardian ad litem.

Vaughan S. Winborne and Samuel Pretlow Winborne, Raleigh, for appellants Stella K. Barbee and Sallie K. Quincy.

Arch T. Allen and Edward B. Hipp, Raleigh, for appellees, Trustees of Rex Hospital.

DENNY, Justice.

The primary purpose of this litigation is to determine whether the trustees of the Rex Hospital, a corporation, acting through its trustees, and Wake County, acting through its Board of County Commissioners, have the legal right to execute the proposed deed, lease, and escrow agreement, referred to hereinabove, for the purposes indicated.

The appellants contend, particularly Wake County and the guardian ad litem for the heirs at law of John Rex et al., that there is nothing in the record to support the view that the hospital plant and the facilities now owned and operated by the trustees of Rex Hospital would need any expansion or improvement if the hospital were operated solely for the care and treatment of the sick and afflicted poor of the City of Raleigh, and that there is nothing in the record to indicate that the present income and assets of the corporation are not sufficient to enable the trustees to operate the hospital for that limited purpose. They contend further that only in the event the income and assets of the hospital are insufficient to provide for the care and treatment of the sick and afflicted poor of the City of Raleigh, is it permissible under the law to modify the trust. Furthermore, even in that event, the modification, it is contended, should be only to the extent necessary to permit the trustees to take care of as many of the sick and afflicted poor of the City of Raleigh as can be cared for by means of the income and assets of the trust and should not be modified so as to permit the consummation of the proposed plan.

These contentions are based on certain provisions contained in the will of John Rex and Chapter 6 of the Private Laws of North Carolina, 1840-41, which are as follows:

1. "It being my desire to provide a comfortable retreat for the sick and afflicted poor belonging to the city of Raleigh, in which they may have the benefit of skillful medical aid and proper attention, it is my will that a lot or parcel of land containing twenty-one acres adjoining the city of Raleigh on the southwest side, being the same purchased by me of the commissioners appointed for selling a part of the public lands, and which is comprised in the general devise of all my lands to the aforesaid Duncan Cameron and Geo. W. Mordecai in trust as before mentioned, be appropriated for the erection thereon of an infirmary or hospital for the sick and afflicted poor of the city of Raleigh and for no other use or purpose whatsoever. "And for the endowment of said hospital as far as I have the ability to do so, it is my will that all the money belonging to me, all the debts due me, and all the rest and residue of my estate hereinbefore given, devised and bequeathed by me to the said Duncan Cameron and Geo. W. Mordecai in trust and not otherwise specially appropriated be, and they are hereby appropriated to the endowment of said hospital, and whenever the constituted authorities of the city of Raleigh shall legally appoint trustees capable in law of holding the same, then the said Duncan Cameron and Geo. W. Mordecai or the survivor of them or the executor or executors of the survivor of them, shall convey the said lot or parcel of land and the funds accruing from the money belonging to me, the debts due and the rest and residue of my estate as above described to the said trustees, or their successors duly *903 appointed in trust forever, for the execution and endowment of such hospital and no other use or purpose whatsoever."

2. The above Act prescribes the method for the appointment of five trustees to take and hold the assets devised under the will of John Rex. Such trustees, according to the Act, must be approved by the Supreme Court, now changed by the amendment hereinabove referred to, to the Superior Court. The Act further provides that when the trustees were nominated and affirmed, they would be "a body corporate and politic by the name of the `Trustees of the Rex Hospital,' and shall be able and capable in law to receive and hold the property and effects, devised and bequeathed by the said John Rex in and by his said will and to use and apply the same to and for the purposes (and none other) specified in said will, and also to receive donations of lands or personal estate either by deed or will for the purposes aforesaid (and none other) and to have succession, to sue and be sued, and to have the other powers incident to corporation in regard to the charity created by the said will and for no other purposes."

The appellants place great stress upon the provisions of the devise and the statute enacted in connection therewith, which require that the property devised and donations received shall be used for the construction of an infirmary or hospital for the sick and afflicted poor of the City of Raleigh, and for the endowment of the hospital, and for no other purpose. (Emphasis added.) They take the position that when these provisions are rightly construed the trustees of Rex Hospital are not authorized to expend any funds received by them to provide hospital facilities in excess of those required for the care of the sick and afflicted poor of the City of Raleigh. We do not concur in this view. In our opinion it was the intention of John Rex to limit the use of the funds to be derived from his estate, but not to limit the use of the hospital facilities to be provided so as to prevent their use as a general public hospital. In expressing his desire to provide a comfortable retreat for the sick and afflicted poor of the City of Raleigh in which they might have the benefit of skillful medical aid and proper attention, he did not limit the use of the proposed infirmary or hospital to the sick and afflicted poor of Raleigh and for no other purpose. He devised his property for the purpose of providing such infirmary or hospital for the sick and afflicted poor of the City of Raleigh and to endow the institution in so far as he could do so, and directed that the funds derived from his estate were to be used for the accomplishment of the above objectives, and for no other purpose.

If the contentions of the appellants were correct and should be upheld, it would be necessary to conclude that the facilities of Rex Hospital are already far in excess of the needs of the indigent sick and afflicted poor of the City of Raleigh even though it appears from Plaintiffs' Exhibit 19, that during the last five years the cost of caring for charity patients has averaged $158,775.32 annually. Furthermore, for the trustees of Rex Hospital and the courts to have construed the trust in the manner now contended, it would have been impractical if not impossible from an economic standpoint to have provided the facilities and the staff necessary to render competent medical services even to the sick and afflicted poor of the City of Raleigh.

These appellants seem to have overlooked the provisions contained in paragraph three of the above Act, as well as the former decisions of this Court involving the John Rex trust.

Section 3 of the above Act reads as follows: "And be it further enacted: That the commissioners of the city of Raleigh, * * * may, * * * by petition in equity in the Supreme Court (now the Superior Court), call on the said trustees for an exhibition of their accounts and doings in discharge of this trust, and such proceedings shall be summary, and the Court may make any order or orders thereupon *904 from time to time as may be necessary to enforce a strict compliance with the design of the testator, * * * and generally to do and order what shall seem to the said Court best in the premises."

In the case of City of Raleigh v. Trustees, 206 N.C. 485, 174 S.E. 278, 281, being an action to restrain the trustees of Rex Hospital from obtaining a grant and loan from the Federal Emergency Administration of Public Works, referred to hereinabove, the Superior Court, among other things, found as a fact that unless the facilities of the hospital were improved the institution would cease to function and the entire property belonging to said corporation would escheat to the University of North Carolina as provided by law; that not only would the small fund of $10,000, donated by John Rex, be forfeited, but also the sum of $212,000 contributed by the public generally and the City of Raleigh, would be lost in so far as the beneficiaries named in the will of John Rex were concerned. The court likewise found that Rex Hospital is a public body corporate, in contemplation of the law and also within the purview of the ruling of the Federal Emergency Administration of Public Works. Upon the facts found, the court concluded as a matter of law, that the trustees of the Rex Hospital, a corporation, "is a public charitable institution rather than a strict charitable trust", and approved the request for the loan and grant. This Court on appeal affirmed the judgment of the court below.

In the case of Martin v. Commissioners of Wake County, 208 N.C. 354, 180 S.E. 777, 783, this Court said: "The trustees of Rex Hospital, as a corporation created by the General Assembly of North Carolina, own and maintain a hospital in the city of Raleigh, Wake county, N.C., for the medical treatment and hospital care of the indigent sick and afflicted poor of the city of Raleigh and of Wake county. This hospital is supported by donations of property and money by individuals and by the city of Raleigh and Wake county, and also by sums paid by patients, who are able to pay, for services rendered to them. It is a public hospital, and is maintained, primarily, as a charitable institution." The Court, thereupon, in the above case and in Martin v. City of Raleigh, 208 N.C. 369, 180 S.E. 786, approved the execution of the contracts referred to in paragraphs seven and eight of the statement of facts herein, pursuant to the provisions of G.S. § 153-152 and G.S. § 160-229, and upon a finding that the respective annual payments required by said contracts would amount to less than fifty per cent of the actual cost of caring for the sick and afflicted poor in Wake County and the City of Raleigh according to the actual annual cost for such services during the previous three years.

It is well to note that Rex Hospital has no endowment as contemplated by the will of John Rex, but is supported by donations by individuals, the Duke Endowment, the North Carolina Medical Care Commission, and by the City of Raleigh and Wake County, and also by sums paid by patients who are able to pay for the services rendered to them. Martin v. Commissioners of Wake, supra. It follows, therefore, that all the assets of the corporation are invested in land, buildings, and hospital facilities.

The expenditure of tax funds for the construction of a general county hospital is for a public purpose; and a county, when authorized by the General Assembly and with the approval of a majority of the voters voting in an election held as provided by law, has as much right to issue its bonds to provide hospital facilities for those citizens who are able to pay for the services rendered to them as it does to provide such facilities for the sick and afflicted poor. Article V, § 3 of the Constitution; G.S. §§ 131-28.3 and 131.28.4; Trustees of Watts Hospital v. Board of Commissioners of Durham, 231 N.C. 604, 58 S.E.2d 696; Burleson v. Board of Aldermen, 200 N.C. 30, 156 S.E. 241; Nash v. Monroe, 198 N.C. 306, 151 S.E. 634. Moreover, when a county acquires an existing hospital facility by purchase, gift, or otherwise, it is expressly authorized *905 by G.S. § 131-126.20(c) to lease such facility to any nonprofit association or corporation for operation on such terms as will carry out the provisions of Article 13B of Chapter 131 of the General Statutes, Trustees of Watts Hospital v. Board of Commissioners of Durham, supra. We hold, therefore, that any lease executed by Wake County for the operation of Saint Agnes and Rex Hospitals must be on such terms as will carry out the provisions of the above Article.

The appellants except to and assign as error the finding of fact to the effect that the trustees of Rex Hospital, a corporation, owns land which its trustees propose to convey to Wake County, in fee simple without any restriction whatever upon the power of alienation or encumbering said property other than the covenant on the part of the trustees not to sell or convey the premises or any part thereof until the debt due the Durham Life Insurance Company has been paid in full.

The above finding is tantamount to a conclusion of law and will be modified to this extent. The property in question is held by the corporation in fee simple and may be conveyed or encumbered with the approval of a court of competent jurisdiction. City of Raleigh v. Trustees, supra; Shannonhouse v. Wolfe, 191 N.C. 769, 133 S.E. 93. Cf. Hall v. Quinn, 190 N.C. 326, 130 S.E. 18.

The appellants also assign as error the conclusion of law to the effect that Wake County has the power to accept the proposed deed from the trustees of Rex Hospital free of the trust created under the will of John Rex.

It is said in Trustees of Watts Hospital v. Board of Commissioners of Durham, supra [231 N.C. 604, 58 S.E.2d 705]: "The deeds from the trustees of Watts Hospital and the heirs and residuary devisees of George W. Watts and Annie Louise Hill convey to Durham County a base, qualified, or determinable fee. Paul v. Willoughby, 204 N.C. 595, 169 S.E. 226; Henderson v. Western Carolina Power Co., 200 N.C. 443, 157 S.E. 425, 80 A.L.R. 497; West v. Murphy, 197 N.C. 488, 149 S.E. 731. Notwithstanding this fact, the court rightly authorized Durham County to accept these deeds. For all practical purposes, they vest in Durham County title to the Watts Hospital property in fee simple absolute; for the estate which they convey will endure forever unless Durham County voluntarily ceases to use the property for hospital purposes or voluntarily changes the name of the hospital standing thereon. Indeed, the statute does not make the acquisition of title by the county a condition precedent to the extension of aid. G.S. § 131-126.26."

We likewise hold that Wake County has the power to accept the proposed deed on the terms and conditions set out therein. However, the property will revert to the trustees of Rex Hospital if it ceases to be used for hospital purposes and to provide care and maintenance for the sick and afflicted poor for both the City of Raleigh and Wake County. It follows, therefore, that the hospital must continue to be operated as a public charitable institution which will include the primary purpose for which the Rex trust was created. With respect to a similar deed from trustees of Watts Hospital to Durham County, Ervin, J., in speaking for the Court in Trustees of Watts Hospital v. Board of Commissioners of Durham, supra, said: "Under the statutes originally enacted as Chapter 933 of the 1947 Session Laws and now codified as Article 13B of Chapter 131 of the General Statutes, Durham County has plenary power to construct, operate, and maintain nonprofit hospital facilities. For this reason, the sanctioned conveyance of the Watts Hospital property to Durham County upon the condition `that the * * * property shall be used for hospital purposes' insures the preservation of the trust estate for the benefit of the ultimate beneficiaries of the trust and the carrying out of the primary purpose of the creator of the trust for all time so far as these things can be done by human foresight and ingenuity in an uncertain world." We do not, however, construe the conditions contained in the proposed deed to increase or diminish the duties *906 imposed by law on Wake County for the care and maintenance of the sick and afflicted poor of the City of Raleigh and Wake County.

In Cone Memorial Hospital v. Cone, 231 N.C. 292, 56 S.E.2d 709, 712, the factual situation is distinguishable from that in the instant case, but with respect to the execution of the deed involved therein which contained a reverter clause, this Court, speaking through Barnhill, J., said: "This agreement, in the form of a deed of conveyance, assures the continued maintenance of the property as a memorial park for the use of the public in substantial compliance with the terms of the trust indenture and in a manner equal, if not superior, to that which would be possible by the trustee. Thus the objective of the trust is preserved and its accomplishment is assured."

The City of Raleigh in its brief suggests that the contracts between the trustees of Rex Hospital and the City of Raleigh and Wake County, to which reference has been heretofore made, are not binding on the trustees of Rex Hospital. These contracts were negotiated pursuant to statutory authority and approved by this Court. There is no evidence of their breach. In fact, the evidence is to the contrary. Hence, we will express no opinion with respect to their validity or as to the rights of the parties thereunder in the event of a breach.

Wake County, in its assignment of error No. 11, raises a question as to the power of the Commissioners to agree to the arbitration of differences that may arise between Wake County and the trustees of Rex Hospital in the interpretation of the operational lease referred to herein, as well as the arbitration of any other dispute that may arise between the parties. Under the provision for arbitration contained in the proposed lease, the findings of the arbitrators are to be submitted in the form of a report or recommendations to both the Commissioners and the trustees of Rex Hospital. It is stated in the lease that "the report shall be given every consideration, but shall not necessarily bind either Wake County or the trustees of the Rex Hospital, it being contemplated that the legal rights of both may be preserved."

"A county board may not delegate its powers involving the exercise of judgment and discretion". 20 C.J.S., Counties, § 89, p. 862. Moreover, to call the provision under consideration an agreement for arbitration is a misnomer. It is merely a prescribed method for obtaining a recommendation for settlement of any dispute that may arise between the parties during the term of the proposed lease, or any renewal thereof. It would seem this purpose could be accomplished as effectively by direct negotiations between the parties, or by appointing a committee or committees for such purpose. Hence, in our opinion, the so-called arbitration clause in the lease should be eliminated therefrom.

Did the Superior Court in the exercise of its equitable jurisdiction have the power to authorize the trustees of Rex Hospital to convey its property to Wake County, subject to the terms and conditions set out in the proposed deed? We think so. Devin, J., now Chief Justice, said in the case of Johnson v. Wagner, 219 N.C. 235, 13 S.E.2d 419, 421: "One of the most important the most important subjects of equitable jurisdiction is that of trusts, and the construction of charitable trusts created by wills, the determination of the duties imposed upon trustees, the powers granted, and the means of effectuating the ultimate benefits conferred, constitute matters peculiarly within the province and jurisdiction of courts of equity. In the exercise of the supervisory power of the courts of equity over trusts, trustees and those interested in the administration of trusts are permitted to apply to the court for plenary and authoritative advice in relation thereto." Brooks v. Duckworth, 234 N.C. 549, 67 S.E.2d 752.

It is said in Holton v. Elliott, 193 N.C. 708, 138 S.E. 3, 4, "courts of equity have jurisdiction to order, and in proper cases do order, the alienation of property devised for charitable uses. Keith v. Scales, 124 N.C. 497, 32 S.E. 809; Vidal v. Girard, 2 How. 127, 43 U.S. 127, 11 L. Ed. 205; 11 *907 C.J. 323; Eaton on Eq., 349. The power is not infrequently exercised where conditions change and circumstances arise which make the alienation of the property, in whole or in part, necessary or beneficial to the administration of the charity."

A court of equity has the power to authorize the conveyance of trust property, where on account of changed conditions the charity would fail, or its usefulness would be materially impaired. Grace Church v. Ange, 161 N.C. 314, 77 S.E. 239.

In the final analysis of the factual situation involved on this appeal, it clearly appears that for fifty-three years after the death of John Rex, no steps were taken to effectuate the purposes for which the Rex trust was created except to procure the passage of Chapter 6 of the Private Laws in 1840-41. It was not until 1892 that it was determined that the site devised by John Rex was not suitable for the location of a hospital. In May of that year, authority of the Superior Court was obtained for the sale of the property. This was done and the sum of $10,000 was obtained therefor. However, seventeen more years were to elapse before Rex Hospital opened its doors for the reception of patients. As a consequence of this delay, the beneficiaries under the will of John Rex had to wait seventy years before any benefits were received from the trust. This was as long as the children of Israel were held in Babylonian captivity. Beginning in 1909 and continuing for a period of twenty-eight years the trustees of Rex Hospital operated a general hospital on South Street in the City of Raleigh. In the meantime, the character of the Rex trust was not judicially determined by the courts until May 1934 in the case of City of Raleigh v. Trustees, supra. Since it was judicially determined that Rex Hospital was a public institution, gifts, grants, and loans of more than a million dollars have been received by the trustees of the hospital in an effort to provide hospital facilities for all the people of Wake County. Most of this money could not have been obtained if the use of the facilities had been limited to a particular class. Moreover, none of the assets of the John Rex trust, including all the donations received by the trustees of the institution, prior to the time it was decided to build the present facilities on Saint Mary's Street, has been used in providing the present facilities, except the nurses' home. Two years after Rex Hospital moved to its present site, the property owned by the trustees on South Street in Raleigh was sold to Wake County, with the approval of the Superior Court, for the sum of $40,000. This sum, together with the $90,000 borrowed from the Reconstruction Finance Corporation, was used for the construction of the nurses' home on Saint Mary's Street. Thus, the present facilities of Rex Hospital, with a replacement value of several million dollars, were made possible by the generosity of individuals, firms, corporations, benevolent organizations, and others who participated in the enterprise with the understanding that Rex Hospital would be maintained as a public institution, open to all the citizens of Wake County, pay patients as well as the sick and afflicted poor. Now, in order to provide much needed additional hospital facilities for the people of Wake County, for both white and colored, should the taxpayers of Wake County be denied the right to utilize these facilities and to expand and improve them, if they desire to do so? The answer is no.

The exceptions and assignments of error based thereon to the overruling of the demurrer and the motions interposed in the court below, by Stella K. Barbee and Sallie K. Quincy, are overruled.

The record contains a number of exceptions which were not brought forward and assigned as error. Even so, it contains more than one hundred such assignments. Some of these have not been discussed in the briefs and are, therefore, under our rules, deemed abandoned. Rule 28, Rules of Practice in the Supreme Court, 221 N.C. 562. These assignments of error, as a matter of course, have not been discussed seriatim. However, all of them which have been brought forward in the several briefs and discussed have been considered, but we *908 have of necessity discussed only those questions raised by the exceptions and assigned as error that we felt warranted discussion.

In view of the findings of the court below, and in light of the authorities cited, we hold that the judgment entered below, except as modified herein, must be upheld.

Modified and affirmed.