North Carolina Department of Justice
North Carolina Department of Justice
North Carolina Department of Justice
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May 24, 1999

Roger Lee Edwards Attorney and Counselor at Law 7201 E. Oak Island Drive Oak Island, N.C. 28465

Re: Advisory Opinion; Administrative Division - Human Services/Medical Facilities Section; Brunswick County Hospital Authority; Assignments of Hospital Leases by Hospital Authorities; N.C. Gen. Stat. § 131E-13

Dear Mr. Edwards:

By letter dated March 31, 1999, as counsel for the Brunswick County Hospital Authority, you asked:

  1. Whether Brunswick County Hospital Authority operates under the provisions of Chapter 131 of the North Carolina General Statutes or Chapter 131E of the North Carolina General Statutes; and

  2. Whether Brunswick County Hospital Authority has the authority to amend or consent to a transfer of the present lease.

It is our opinion that:

  1. Brunswick County Hospital Authority operates under the provisions of Chapter 131E of the North Carolina General Statutes; and

  2. Brunswick County Hospital Authority has the authority to amend or consent to a transfer of the present lease. However, the provisions of N.C. Gen. Stat. § 131E-13 would apply to any assignment of the lease.

FACTS

We understand that Brunswick County Hospital Authority was organized prior to 1983 under the provisions of Chapter 131 of the North Carolina General Statutes. The North Carolina General Assembly subsequently repealed Chapter 131 and replaced it with Chapter 131E. 1983 N.C. Sess.

Please Address Replies to "Human Services/Medical Facilities Section" Writer’s Telephone: (919) 716-6883 / Facsimile: (919) 716-6756 / E-mail: jwellons@mail.jus.state.nc.us

Roger Lee Edwards Attorney and Counselor at Law May 24, 1999 Page 2

Laws c. 775. Parts of the act were effective upon ratification on July 15, 1983 and other parts were effective on January 1, 1984. 1983 N.C. Sess. Laws c. 775, s. 7. On May 17, 1984, the Authority leased Brunswick County Hospital to Hospital Corporation of North Carolina and Hospital Corporation of America. The lease expressly provides that the lessee may not sell, assign, mortgage, or transfer the lease. N.C. Gen. Stat. § 131E-13, which regulates the sale or lease of public hospital facilities, was enacted on July 2, 1984 and applies to leases, sales, and conveyances made on or after July 1, 1984. 1984 N.C. Sess. Laws c. 1066, c. 3. The Authority has been asked to amend the May 17, 1984 lease to permit the lease to be assigned and to consent to the assignment of the lease to Brunswick Hospital, L.L.C.

ANALYSIS

I. BRUNSWICK COUNTY HOSPITAL AUTHORITY OPERATES UNDER THE PROVISIONS OF CHAPTER 131E OF THE NORTH CAROLINA GENERAL STATUTES.

You state that the Authority questions whether its powers are derived from Chapter 131 or Chapter 131E of the North Carolina General Statutes because the act that repealed Chapter 131 provides that:

Notwithstanding the foregoing, any unit of government, or units of government acting jointly, that as of December 31, 1983, is operating a hospital or hospitals pursuant to Articles 2 or 2A of Chapter 131 of the General Statutes may continue to operate pursuant to the provisions of those Articles as they existed on December 31, 1983, to the extent that those Articles are inconsistent with this Chapter. However, a unit of government that has been operating a hospital pursuant to those Articles may choose to continue operations under the provisions of one of the Parts of Article 2 of this Chapter by adopting an appropriate resolution . . . .

1983 N.C. Sess. Laws c. 775, s. 3 (emphasis added). You have stated that you have been unable to locate any resolution by which the Authority may have elected to operate under the provisions of Chapter 131E.

It is our opinion that the General Assembly did not give the Brunswick County Hospital Authority, or any other hospital authority, the privilege of continuing to operate under the provisions of Chapter 131 after that chapter’s repeal. The exception created by Section 3 of Chapter 775 applies only to units of government that were operating hospitals pursuant to Articles 2 or 2A of Chapter 131 as of December 31, 1983. Before the 1983 repeal of Chapter 131, hospital authorities operated pursuant to Article 12 of Chapter 131 and not Articles 2 or 2A. See N.C. Gen. Stat. § 131-90, et seq. (1981). Furthermore, although most of Chapter 131 was repealed effective January 1, 1984, Article Roger Lee Edwards Attorney and Counselor at Law May 24, 1999 Page 3

12 of Chapter 131 was repealed effective July 15, 1983. 1983 N.C. Sess. Laws c. 775, ss. 5 and 7. Therefore, all hospital authorities have operated under the provisions of Chapter 131E of the North Carolina General Statutes since July 15, 1983.

II. BRUNSWICK COUNTY HOSPITAL AUTHORITY HAS THE AUTHORITY TO AMEND OR CONSENT TO A TRANSFER OF THE PRESENT LEASE. HOWEVER, THE PROVISIONS OF N.C. GEN. STAT. § 131E-13 WOULD APPLY TO ANY ASSIGNMENT OF THE LEASE.

Hospital authorities are authorized to lease hospital facilities to any corporation, foreign or domestic, authorized to do business in North Carolina. N.C. Gen. Stat. §§ 131E-13(a) and 23(a)(20)(1997). Nothing in the law prohibits a hospital authority from amending such a lease during the term of the lease. Id. Furthermore, paragraph 20.05 of the Authority’s May 17, 1984 lease with HCNC and HCA specifies how the lease may be amended. Therefore, it is our opinion that the Authority has the authority to agree to amend the May 17, 1984 lease.

A hospital lease may be assigned. See N.C. Gen. Stat. § 131E-13(c). Although paragraph

13.01 of the Authority’s May 17, 1984 lease currently specifies that the lessee may not assign the lease, that prohibition may be amended by the mutual written agreement of the parties. The Authority must decide for itself whether such an amendment would be in the best interest of the residents of Brunswick County.

The Authority’s authority to consent to an assignment of the May 17, 1984 lease is not unrestricted. N.C. Gen. Stat. § 131E-13(c) provides that lease assignments are subject to all of the conditions of N.C. Gen. Stat. § 131E-13, including the notice and bid requirements of N.C. Gen. Stat. § 131E-13(d). These requirements apply to the proposed assignment because it would result in a conveyance on or after July 1, 1984. Therefore, it is our opinion that the Authority may not consent to any assignment of the lease unless it first solicits bids from five potential lessees and complies with all of the other substantive and procedural requirements of N.C. Gen. Stat. § 131E-13.

Sincerely,

Ann Reed Senior Deputy Attorney General

James A. Wellons Special Deputy Attorney General