August 18, 1997
Thomas S. Stukes, Esq. Smith Helms Mulliss & Moore, L.L.P. Post Office Box 21927 Greensboro, North Carolina 27420
Advisory Opinion: Lease Agreement between Henderson County and Hospital Authority; Lease Provisions requiring approval of County before Hospital Authority exercises certain powers; N.C. Gen. Stat. § 131E-23; N.C. Gen. Stat. § 131E-31.
On behalf of Margaret R. Pardee Memorial Hospital, a county hospital located in Hendersonville, North Carolina (the "Hospital"), you have asked the following questions:
- Does Henderson County have the authority to lease the Hospital’s properties to a hospital authority organized pursuant to Part B of Article 2 of Chapter 131E of the North Carolina General Statutes (the "Hospital Authorities Act") under lease terms which would require the hospital authority to obtain the County’s prior written approval before it exercises some of its powers?
- Would the hospital authority be bound by provisions in the lease that would require the hospital authority to obtain the County’s prior written approval before it exercises some of its powers and would those provisions be enforceable by the County against the hospital authority?
For the reasons set forth below we conclude that:
- Under N.C. Gen. Stat § 131E-31, a county has the authority to lease hospital property to a hospital authority organized pursuant to the Hospital Authorities Act under a lease that would require the hospital authority to obtain the county’s prior written approval before it exercises some of its powers.
- Pursuant to N.C. Gen. Stat. § 131E-31, the hospital authority would be bound by the terms of the lease between the county and the hospital authority that would require the county’s prior written approval before the hospital authority exercises some of its powers, and such provisions would be enforceable by the county against the hospital authority.
STATEMENT OF FACTS
The Hospital is a county hospital created under Resolution adopted June 4, 1951 by the Board of County Commissioners of Henderson County pursuant to former N.C. Gen. Stat. § 131-126.21, since repealed, and is currently operating as a county hospital under the authority of that statute. The Board of Commissioners of Henderson County and the Hospital are considering reorganizing the Hospital as a hospital authority under the Hospital Authorities Act. To accomplish the reorganization, the 1951 Resolution would be repealed, and the County would lease the Hospital’s properties to a new hospital authority that would be created by Henderson County and incorporated under the Hospital Authorities Act (the "Hospital Authority"). The Hospital Authority would possess all powers available to a hospital authority under the Hospital Authorities Act. However, the Lease between the County and the Hospital Authority would contain certain terms and conditions that would require the Hospital Authority to obtain the County’s prior written approval before it would exercise some of those powers.
ANALYSIS
N.C. Gen. Stat. § 131E-31 governs a county’s lease of hospital property to a hospital authority formed under the Hospital Authorities Act. Subsection (a) of that statute provides as follows:
A city or county may lease, sell, convey or otherwise transfer, with or without consideration or with nominal consideration, any property, whether real or personal or mixed, to a hospital authority whose territorial boundaries include at least part of the city or county. A hospital authority is authorized to accept such lease, transfer, assignment or conveyance and to bind itself to the performance and observation of any agreements and conditions required by the city or county.
For purposes of this opinion, we assume that Henderson County will duly organize the Hospital Authority in accordance with the Hospital Authorities Act and that the territorial boundaries of the Hospital Authority will include Henderson County. We also assume that the Hospital Authority will have all of the powers of a hospital authority under the Hospital Authorities Act.
It is our opinion that N.C. Gen. Stat. § 131E-31(a) expressly authorizes a county to lease hospital property to the hospital authority created under the Hospital Authorities Act when the territorial boundaries of the hospital authority include at least part of the county. The statute further authorizes a hospital authority "to accept such lease . . . and to bind itself to the performance and observation of any agreements and conditions required by the . . . county." Id. (emphasis added). The broad authorization for a hospital authority to bind itself to the performance and observance of "any agreements and conditions" would include any terms of a lease that would require the county’s prior written approval before the hospital authority exercises certain of its powers or takes certain types of actions. N.C. Gen. Stat. § 131E-31(a) is controlling on the questions presented.
We note that N.C. Gen. Stat. § 131E-23(a)(37) expressly authorizes a hospital authority to agree to limitations on the exercise of any of its powers "in connection with any loan by a government." Whether or not that statute creates a negative inference that a hospital authority is not otherwise authorized to limit its powers, the express provisions of N.C. Gen. Stat. § 131E-31 override any such inference with respect to limitations that might be imposed under the terms and conditions of a lease under which a county transfers hospital property to a hospital authority as contemplated by the facts presented.
N.C. Gen. Stat. § 131E-31 appears to have been intended to provide a county with flexibility to custom-tailor its relationship with a hospital authority that it creates under the Hospital Authorities Act. We recognize that this ability can be important because a hospital authority will have a degree of independence from the county after such a transfer, and the contractual relationship between the parties under the lease provides the basis for establishing their ongoing relationship as determined by the county.
CONCLUSION
For the foregoing reasons, we conclude that:
- Henderson County has the authority under N.C. Gen. Stat. § 131E-31 to lease the Hospital’s property to a Hospital Authority organized by Henderson County under the Hospital Authorities Act under agreements and conditions that would require the Hospital Authority to obtain the County’s prior written approval before it exercises certain of its powers.
- Under N.C. Gen. Stat. § 131E-31, the Hospital Authority would be bound by the terms of a lease that would require the Hospital Authority to obtain the County’s prior written approval before the Hospital Authority exercises certain of its powers, and such lease provisions would be enforceable by the County against the Hospital Authority.
Sincerely,
John R. McArthur Chief Counsel
James A. Wellons Special Deputy Attorney General