UMs win control of hospital-sale funds

 

Court in Kentucky
upholds ‘trust clause’
in 7-year legal battle

United Methodist News Service
LEXINGTON, Ky.—A seven-year legal battle between the Kentucky Conference and an affiliated foundation has ended in favor of the conference.
The outcome upholds the United Methodist “trust clause” pertaining to local church property.
The conference and the board of trustees of the Good Samaritan Foundation were battling for control of $20 million in assets resulting from the 1995 sale of UM-related Good Samaritan Hospital in Lexington.
When the hospital was sold to a for-profit company, the foundation –– described as “a philanthropic organization dedicated to serving the healthcare needs of Kentucky’s poor and disadvantaged”––placed those assets in an endowment fund providing $1 million a year in health-related grants.
In 2000, the foundation’s board of trustees stopped reporting to the conference and said it was no longer affiliated with The United Methodist Church. The conference sued, claiming ownership of the hospital at the time of the sale.
Fayette County Circuit Judge Gary Payne ruled in December that the church rightfully owned the hospital and the money from its sale. He ordered that the church appoint a new foundation board.
The board appealed. The state appeals court sent the case back to Payne. He reaffirmed his earlier decision.
Under a plan announced in June, the conference and former foundation trustees have named 15 members to a transitional board. The conference is to name all members to the board by 2012.
The foundation continues its mission to provide healthcare, health education and research ministries for the people of Kentucky.
“We are looking forward to being able to continue with the mission of working to improve the health and healthcare situation of Kentuckians,” said Michael Watts, Kentucky Conference treasurer.
Watts said the legal battle involved control by the foundation’s board, which refused to give the conference an accounting of the proceeds.
“While conference did not object to the foundation’s use of the money from the sale of the hospital for healthcare needs,” Watts said, “the suit was filed because of the trust clause.” That clause covered the foundation’s relationship with the conference.
The trust clause, which dates back to the days of Methodism founder John Wesley, declares that each local church holds its property in trust for the denomination. The clause has been upheld in U.S. courts throughout the 223-year history of the denomination.
The foundation’s position “was that the trust clause was not in the documentation for the articles of incorporation,” Watts said.
In Kentucky, a trust clause doesn’t have to be in writing, “so we maintained that we had established that trust relationship in 1925,” Watts said.
The legal wrangling, while difficult at times, has helped all entities understand that “the trust clause still is a vital part of our polity as United Methodists, and we certainly want to uphold the polity of the church,” Watts said
The legal battle took some interesting twists and turns over the years.
The appeal of the Payne’s ruling was led by James Holsinger, president of the Judicial Council, the denomination’s highest court. Holsinger served as chairman of the Good Samaritan Foundation’s board.
Holsinger, who was nominated by President Bush last spring as U.S. surgeon general, was quoted by Media Transparency as saying the church is “only interested in the foundation’s money, not its cause.”
Holsinger, who awaits confirmation as the country’s top doctor, has declined interviews on all matters, including the legal battle with the Kentucky conference.