Request By:
Mr. Eddie C. Lovelace
Lovelace & Carroll
104 Cumberland Street
Albany, Kentucky 42602
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
In your letter of April 29 you asked whether in the opinion of this office, the Fiscal Court of Clinton County has the right to assume control of the operation and management of the Clinton County War Memorial Hospital (hereinafter the hospital) and whether the execution of a deed of conveyance from Clinton County to Clinton County War Memorial Hospital, Inc. (hereinafter CCWMH, Inc.) was proper.
It is within the power of the fiscal court to sell property belonging to the county. KRS 67.080(2). That power is not affected by the fact that federal funding was obtained under the Hill-Burton Act for construction of the hospital. Title 42 USCA § 291(m);
Stanturf v. Sipes, D.C. Mo. (1963) 224 F.Supp. 883, affirmed 335 F.2d 224, cert. den. 885 S. Ct. 676, 379 U.S. 977, 13 L. Ed. 567;
Abernathy v. City of Irvine, Ky., 355 S.W.2d 159 (1962). Therefore, it was proper, in the sense of being within its authority, for the fiscal court to execute a deed conveying the land and appurtenances known as the hospital to CCWMH, Inc.
Notwithstanding the fact that the fiscal court has the power to make such a conveyance, there is some question of whether the deed as executed did in fact vest ownership of the hospital in CCWMH, Inc. The deed, on its face, meets the requirements of a valid and legally operative instrument. KRS 371.010.
Under Wilson v. Mitchell, 245 Ky. 55, 53 S.W.2d 175 (1932) consideration given in support of a sale of land need not be financial consideration. Therefore, it is the opinion of this office that the land and appurtenances known as the hospital became the property of CCWMH, Inc., a private nonprofit corporation, by deed of March 22, 1965.
Pursuant to KRS 67.080(8) the fiscal court may:
". . . appropriate county funds for the benefit of infirmaries for the sick located in the county, provide for the care, treatment and maintenance of the sick and poor and provide a hospital for that purpose, or contract with any hospital in the county to do so."
Pursuant to KRS 216.040:
"The county hospital shall be under the control of the proper county authorities."
Under these statutes there is no requirement that the county maintain a hospital as a governmental function. Nor is there any requirement that a county continue to maintain a hospital project as a governmental institution though it once undertook to do so.
Abernathy v. City of Irvine, supra. The only requirements are that if the county does choose to maintain a hospital as a governmental instrumentality the hospital must be controlled by public officials, and the county shall not operate a hospital in partnership with a private corporation.
Knox County Fiscal Court v. Knox County General Hospital, Inc., Ky., 528 S.W.2d 673 (1975). Thus, if the hospital is the county hospital, in the sense of being a governmental instrumentality, the fiscal court must have ultimate control of the operation and management. But, if the hospital is a private corporation under CCWMH, Inc., the fiscal court has no right to exercise control.
Normally it would be obvious that any services provided by a private corporation are not subject to county control. However, where the private corporation is engaged in providing services highly similar to these performed by a county as a governmental function, or where federal and state funding are involved, there is a question as to whether the private corporation in essence becomes a public corporation subject to county control. Therefore, in order to determine whether the Clinton County Fiscal Court has any right to control the operation of the hospital it is necessary to determine whether CWMH, Inc., a private nonprofit organization, has become a public corporation by virtue of the fact that the hospital was constructed with federal funds obtained under the Hill-Burton Act and the fact that CCWMH, Inc. was formed for the purposes of obtaining a deed to the hospital and operating and maintaining the same as a public nonprofit hospital for the benefit of the residents of Clinton County.
In
Stanturf v. Sipes, supra, the court engaged in extensive analysis of this question. Quoting from
Dartmouth College v. Woodward, 4 Wheat 518, 17 U.S. 518, 4 L. Ed. 629 (1819) the court said:
". . . When the corporation is said . . . to be public, it is not merely meant that the whole community may be the proper objects of the bounty, but that the government have the sole right, as trustees of the public interest, to regulate, control and direct the corporation. . ."
Under Abernathy v. City of Irvine, supra and Knox
County Fiscal Court v. Knox County General Hospital, Inc., supra, it is clear the county must have an ownership interest or financial obligation in the hospital or must have contracted with the privately owned services for its residents before the hospital becomes a public corporation. None of these elements are present in this situation.
Further, the court in
Stanturf v. Sipes, supra quoted from
Khoury v. Community Memorial Hospital, Inc., 203 Va. 236, 123 S.E.2d 533 (1962) saying:
"We next turn to the question of whether the use of federal and state funds for construction thereby constitute the hospital a public corporation.
* * *
"The hospital is not owned by the federal or state government, albeit federal and state funds may have made its construction possible. It is not an instrumentality of the government for administration of a public duty, although the service it performs is in the public interest. Its officers are not appointed by and are not representatives of the government, nonwithstanding that their authority stems from legislative enactment. Under the circumstances, the hospital falls squarely within the time honored definition of a private corporation."
So too does CCWMH, Inc.
Therefore, it is the opinion of this office that the hospital became and remains a private corporation when title passed to CCWMH, Inc. and that the Fiscal Court has thereby been divested of any and all rights to assume control of the operation and management by reason of that transaction.