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Decision No. 92

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November 24 1952
In Re: Power of an Annual Conference to Authorize a Hospital Owned by the Conference to Borrow Money

Digest of Case

An Annual Conference may authorize a subsidiary hospital corporation to borrow up to a certain percentage of the value of its property for the purpose of its expansion program. When appraised as provided in the Resolution under consideration it cannot be held that such Resolution authorized an unlimited incurring of indebtedness. JURISDICTION The Judicial Council has jurisdiction under Paragraph 909 of the 1952 Discipline which authorizes the Council "to pass upon the Decisions of Law made by the Bishops in Annual and District Conferences."

Statement of Facts

The Good Samaritan Hospital is a corporation whose Trustees are elected by the Kentucky Annual Conference and are under the control of the Conference. They ask for authority from the Conference to incur, if necessary, a maximum indebtedness of 25% of the evaluation of its land, as fixed by the Board of Trustees of the Good Samaritan Hospital, hereinafter called the Board of Trustees, and 25% of the evaluation of the property fixed by the Kentucky Actuarial Bureau for the purposes of insurance, such 25% to be based on such evaluation statement next preceding the time of incurring such indebtedness. Marcus C. Redwine, hereinafter called the appellant, questioned the power of the Conference to grant the request and asked for a ruling on the following question: In the request submitted by the Board of Trustees of the Good Samaritan Hospital, owned by the Conference, is there not implied, if not expressly stated, a surrender of the sovereign power and discretion, vested in the supreme body to the Board of Trustees, the subordinate body? Can this Conference legally authorize said Board to provide its own means and power to incur unlimited indebtedness against the assets of this Conference? In the final analysis, does not the Conference have to say, "What is the highest debt limit that may be legally placed against the hospital?" The request of the Trustees was granted by the Conference. The next day the presiding Bishop, William T. Watkins, made the following ruling: The Kentucky Annual Conference is within its rights to grant the Good Samaritan Hospital the right to incur indebtedness up to twenty-five per cent of its appraised assets. No request was before the Conference for unlimited indebtedness. ANALYSIS By his first question the appellant asked if the Conference did not surrender its sovereign power and discretion to the Board of Trustees, a body subordinate to the Conference. The contrary was the fact. The Board of Trustees in asking the Conference for authority to incur indebtedness acknowledged the superior power of the Conference. The second question apparently asked if the Conference can give the Board of Trustees power to incur debt without limit and pledge the assets of the Conference. This is contrary to the fact. Instead of being unlimited in indebtedness it was limited to 25% of the value of the property of the hospital corporation based on evaluation statement next preceding the time of incurring such indebtedness. Therefore, there is a limit of indebtedness satisfactory to the Conference which authorized the same. In this instance the only assets of the Conference authorized to be pledged are the assets of its subsidiary corporation. The third question asked if the Conference does not have to say what is the highest amount of debt that the hospital can incur. Probably the appellant means to ask if the Conference is not required to state in dollars the limit that can be borrowed. In stating the percentage of the value of the property that can be borrowed, the Conference fixed a limit. However, since Paragraph 631 of the 1952 Discipline distinctly implies that an Annual Conference can obligate itself, it is obvious that the Conference may authorize a subsidiary corporation to incur indebtedness and not fix the limit. Such, however, was not the case here.

Decision

It is therefore the Decision of the Judicial Council that the ruling of Bishop Watkins be and it is hereby affirmed.

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