1. Statute of Limitations--continuing wrong doctrine--not a malpract
ice action--not
applicable
The continuing wrong doctrine of Costin v. Shell, 53 N.C. App. 117, did not apply to
provide relief from the statute of limitations in a declaratory judgment action arising from the
conveyance of a hospital tract and facility because this was not a case involving professional
malpractice. The general rule for claims other than malpractice is that a cause of action accrues as
soon as the right to institute and maintain a suit arises. Plaintiff here could have instituted the suit
at the time of conveyance.
2. Statute of Limitations--transfer of hospital facility--two- or th
ree-year limitations
period
Plaintiff's action seeking a declaratory judgment and injunctive relief voiding the transfer
of a hospital facility was barred by the statute of limitations where the deed to the hospital tract
was executed on 28 March 1994, a quitclaim deed to personal property within the hospital was
recorded on 20 February 1995, and the action was brought on 21 August 1998. Although
plaintiff argued for the ten-year limitations period of N.C.G.S. § 1-56, the causes of action against
the County and the county commissioners require the use of the two-year period of N.C.G.S. § 1-
53(1) for actions against a local unit of government arising from a contract (a deed is a contract),
while the three-year period of N.C.G.S. § 1-52(1) applies to claims against the defendants which
are not local units of government.
3. Statute of Limitations--transfer of hospital facility--session la
w--constitutionality--
three-year limitations period
A challenge to the constitutionality of Senate Bill 335 arising from the transfer of a
hospital facility was time barred pursuant to the three-year period of N.C.G.S. § 1-52(2) (“upon
liability created by statute”) because the claim was that some or all of the defendants were liable
for creating or following an unconstitutional law.
Moore & Van Allen, PLLC, by Denise Smith Cline and Robert A.
Meynardie, for plaintiff-appellant.
Nicholls & Crampton, P.A., by W. Sidney Aldridge, for
defendant-appellees Richmond County, Thad Ussery, Kenneth R.Robinette, John B. Garner, J. C. Lamm, R. Lynn McCaskill,
Craig S. McNeill and J. C. Watkins.
Maupin Taylor & Ellis, P.A., by D. Royce Powell and James E.
Gates, for defendant-appellee Richmond Memorial Hospital.
Kilpatrick Stockton LLP, by Noah H. Huffstetler, III, for
defendant-appellee Firsthealth of the Carolinas, Inc.
Attorney General Michael F. Easley, by Special Deputy Attorney
General James A. Wellons, on behalf of the North Carolina
Medical Care Commission, amicus curiae.
McGEE, Judge.
Richmond Memorial Hospital (RMH), a nonprofit corporation
formerly named Richmond County Memorial Hospital, was incorporated
in 1947 by approximately forty citizens of Richmond County. In
1948 three citizens deeded a tract of land (hospital tract) of
approximately twenty acres in Richmond County to RMH as a gift. In
1949 RMH conveyed the hospital tract to Richmond County (the
County) in order that the County would qualify for matching federal
and state funds under federal law for development of a hospital.
For the next two years the County invested approximately $250,000
in a facility to be built on the hospital tract. The hospital
opened in 1952 and since then has been operated continuously by
RMH. In 1952 the County leased to RMH the hospital tract upon
which the hospital is located for a sum of $1.00 per year for an
initial term of twenty-five years, including an automatic renewal
for another twenty-five year term expiring on 31 May 2002. The
County did not invest in the hospital or hospital tract after 1952. The Richmond County Commissioners (county commis
sioners)
approved a resolution on 1 June 1992 authorizing the conveyance of
the hospital tract to RMH, citing "authority to do so under
N.C.G.S. 131E-8." See N.C. Gen. Stat. § 131E-8 (1999) ("A [county]
. . . upon such terms and conditions as it deems wise . . . may
sell or convey to a nonprofit corporation . . . any rights of
ownership . . . in a hospital facility[.]") In the resolution the
county commissioners specified that "Richmond County never has been
in the hospital business and does not intend to get into the
operation of a hospital in the foreseeable future." The county
commissioners asked state legislators on 7 December 1992 to
introduce a bill in the North Carolina General Assembly permitting
the County to convey the hospital by means other than those
provided in N.C. Gen. Stat. § 131E-13(d)(2), which requires that"At the meeting to adopt a resolution of intent, the [county] .&n
bsp;. .
shall request proposals for lease or purchase by direct
solicitation of at least five prospective lessees or buyers." See
N.C.G.S. § 131E-13(d)(2) (1999).
During the 1993 legislative session, the North Carolina
General Assembly enacted Chapter 10 of the 1993 Session Laws
stating: "The provisions of G.S. 131E-13(d)(2) do not apply to the
conveyance by Richmond County to [RMH], a North Carolina nonprofit
corporation, of [the hospital tract]." In the 1995 session, the
General Assembly approved Senate Bill 725 and enacted Chapter 597
of its 1995 Session Laws, entitled "An act to exempt Richmond
County from certain restrictions relating to the sale of hospital
facilities to nonprofit corporations." Section 1 of the Act
rewrites N.C. Gen. Stat. § 131E-8(a) to read: "A [county] . . . may
sell or convey to a nonprofit corporation . . . any rights of
ownership . . . in a hospital facility . . . if the nonprofit
corporation is legally committed to continue to operate the
facility as a community general hospital[.]" Section 2 of the Act
states: "This act applies to Richmond County only." N.C.G.S. §
131E-8(a) has since been modified and no longer refers to the
County except in a notation by the publisher appearing below the
statutory language. See N.C. Gen. Stat. § 131E-8(a) (1999) ("Local
Modification -- Richmond: 1995 (Reg. Sess., 1996), c. 597, s. 1.).
The County held public hearings to discuss the conveyance and
executed a deed on 28 March 1994 conveying the hospital tract to
RMH. RMH assumed the County's debt of approximately $3.7 millionin bonds. See N.C. Gen. Stat. § 131E-8(b) (1999) ("[T]he
nonprofit
corporation . . . will provide sufficient money to pay the
principal of and the interest and redemption premium, if any, on
all bonds then outstanding[.]"). The deed between the County and
RMH includes an express reversionary provision which would be
triggered in the event the hospital tract were no longer used for
the operation of a nonprofit hospital.
RMH and the County executed a "termination of lease,"
recorded on 20 February 1995, which ended the hospital tract lease
between RMH and the County. The County also recorded a quitclaim
deed on 20 February 1995 for any personal property located in the
hospital. The deed states that "Richmond County has never claimed
any title or interest in the personal property located in the
hospital building[.]" RMH then constructed a $9,000,000 patient
tower and birthing center, which included the renovation of nearly
25,000 square feet of the existing facility. RMH also hired 300
new employees, bringing the total number of employees to 750, and
doubled the annual payroll to total $18,000,000. For the
construction and renovation, RMH applied for a "certificate of
need" (CON) which was issued by the North Carolina Department of
Human Resources (NCDHR) as required by N.C. Gen. Stat. § 131E-175
(1999) (entitled "Certificate of Need"). A "declaratory ruling"
from NCDHR concluded that "RMH is the owner of all CONs issued to
it as applicant, so long as RMH is in lawful possession of the real
property comprising the Hospital[.]" The construction and
renovation were financed with $12,000,000 in hospital revenue bondsissued by the North Carolina Medical Care Commission. RMH's title
to the hospital tract was pledged as collateral for a letter of
credit, which collateralized the bonds.
Plaintiff Hamlet HMA, Inc. was incorporated in 1987 as a North
Carolina corporation and has since continuously operated Hamlet
Hospital, which is the only other hospital in Richmond County.
Hamlet HMA, Inc. is a wholly owned subsidiary of Health Management
Associates, Inc. (HMA), a for profit Delaware corporation
headquartered in Florida and traded on the New York Stock Exchange.
HMA is not authorized to conduct business in North Carolina.
Between 19 May 1992 and 30 March 1994, neither HMA nor Hamlet HMA,
Inc. expressed interest in purchasing the hospital tract or made
objection to its conveyance.
Sometime during or before 1994, RMH "finally recogniz[ed]" its
"increasing competitive disadvantage" among larger hospital groups,
and decided "an alliance with an acceptable larger entity [was]
needed quickly." In November 1994, RMH began "discussions about
selling or leasing its assets" primarily with HMA and two nonprofit
corporations, Carolinas Medical System and FirstHealth of the
Carolinas, Inc. (FirstHealth). RMH executed a letter of intent on
23 July 1998 to sell its assets for $44 million to FirstHealth,
which is based in Pinehurst, North Carolina and is sole owner of
Moore Regional Hospital. Following the sale, RMH planned to spend
$14,000,000 to satisfy debts in bonds and loans that were secured
by the hospital tract, and the remaining $30,000,000 for
"charitable healthcare needs of the citizens of Richmond County and. . . other charitable purposes as permitted by the
Internal
Revenue Service."
The senior vice president of HMA stated in a letter dated 30
July 1998 to Thad Ussery, chairman of the county commissioners, and
to Robert Hutchinson, chairman of the RMH board, that:
Hamlet Hospital (a Richmond County taxpayer)
and [HMA] must voice [their] concern relating
to the process for selling [RMH]. While it
may or may not be legal to bypass the
prescribed procedure that all other North
Carolina Hospitals must follow in similar
transactions, it is certainly not in the best
interest of Richmond Countians for [RMH] and
Richmond County to consider the sale of [RMH]
without an open and public bidding process.
HMA, therefore, is submitting an alternative
proposal[.]
In its proposal dated the same day, HMA offered to purchase the
assets of RMH for $55,000,000, consisting of $45,000,000 to be paid
to RMH and $10,000,000 to the County. RMH refused HMA's offer.
The county commissioners adopted a resolution on 3 August 1998
entitled
Resolution initiating the correction of
certain statutory procedures affecting the
transfer and conveyance of Richmond Memorial
Hospital from Richmond County to Richmond
Memorial Hospital, a North Carolina nonprofit
corporation, and notice of intent to quitclaim
the hospital facility as a corrective action
pursuant to N.C. Gen. Stat. §131E-13(d), as
amended.
According to the resolution:
The Commissioners will not request
proposals for the lease or purchase of the
Hospital facility by direct solicitation of at
least five (5) prospective lessees or buyers
as generally required by N.C. Gen. Stat.
§131E-13(d)(2), since such requirements havebeen rendered inapplicable to the conveyance
by Richmond County to [RMH], a North Carolina
nonprofit corporation, of the real property on
which the Hospital is situated, as stated in
Senate Bill 335, described above[.]
The resolution also states "[t]he Commissioners shall conduct a
public hearing on this matter[.]" The hearing was held on 23 and
24 August 1998.
Hamlet HMA, Inc. filed a verified complaint against defendant
RMH, the County, and the county commissioners in their official
capacities on 21 August 1998. The complaint asserts three claims
for relief: (1) a declaratory judgment that the County's conveyance
of the hospital tract and facility to RMH is void for failure to
comply with N.C. Gen. Stat. § 131E-13(d); (2) a declaratory
judgment that a session law enacted by the General Assembly, Senate
Bill 335, is void and unconstitutional pursuant to Article II,
section 24 of the North Carolina Constitution; and (3) a
preliminary and permanent injunction restraining the County from
conveying real or personal property to RMH unless it complies with
N.C. Gen. Stat. §131E-13(d). Defendants RMH, the County, and the
county commissioners filed motions to dismiss in September 1998.
The trial court entered orders on 21 October 1998 denying a
preliminary injunction for plaintiff and dismissing plaintiff's
complaint with prejudice pursuant to Rules 12(b)(1) and 12(b)(6) of
the N.C. Rules of Civil Procedure, as requested by defendants'
motions. Plaintiff timely filed notice of appeal.
In its brief, plaintiff contends the trial court erred in: (1)
dismissing the complaint pursuant to N.C.R. Civ. P. 12(b)(6)because the complaint states valid causes of action for which
relief may be granted; (2) dismissing the complaint pursuant to
N.C.R. Civ. P. 12(b)(1) because plaintiff has standing; and (3)
denying plaintiff's motion for a preliminary injunction because
plaintiff is likely to succeed on the merits and will be
irreparably harmed without the injunction.
Defendants argue that plaintiff cannot prevail on its claims
in that the applicable statute of limitations expired prior to
filing of plaintiff's complaint. In the order denying an
injunction for plaintiff, the trial court stated "[i]t is proper
for the Court to consider the applicable statute of limitations[,]"
and "[t]he plaintiff has failed to meet its burden of proof showing
that it is likely to prevail on the merits of its case." The order
dismissing plaintiff's complaint cites N.C.R. Civ. P. 12(b)(6),
failure to state a claim upon which relief may be granted. As to
this dispositive issue, plaintiff argues that its claims are not
time-barred.
Plaintiff argues that regardless of the correct statute of
limitations period, its complaint invokes the "continuing wrong
doctrine" whereby "an ongoing violation causes the action not to
accrue until the violation . . . ceases." Plaintiff cites Costin
v. Shell, 53 N.C. App. 117, 280 S.E.2d 42, disc. review denied, 304
N.C. 193, 285 S.E.2d 97 (1981) to support its argument. In Costin
our Court upheld an injunction granted by the trial court against
the defendant, who had been violating podiatry statutes by
unlawfully practicing podiatry and holding himself out as a Doctorof Podiatry when the complaint was filed. We stated that "the ten-
year statute of limitations, if applicable, would not have been
tolled at the time the complaint was filed" by the Board of
Podiatry Examiners. Costin, 53 N.C. App. at 120, 280 S.E.2d at 44.
Indeed, as to both malpractice actions and omissions the cause of
action accrues and the statute of limitations begins to run at the
time of defendant's last act giving rise to the cause of action.
N.C. Gen. Stat. § 1-15 (c) (1999); Callahan v. Rogers, 89 N.C. App.
250, 253, 365 S.E.2d 717, 719 (1988). The general rule, for claims
other than malpractice, provides that a cause of action accrues as
soon as the right to institute and maintain a suit arises. N.C.
Gen. Stat. § 1-15 (a) (1999); Thurston Motor Lines v. General
Motors Corp., 258 N.C. 323, 325, 128 S.E.2d 413, 415 (1962).
Plaintiff's complaint is for (1) a declaratory judgment as to the
constitutionality of legislation governing conveyances, (2) a
declaratory judgment upon the validity of a conveyance between two
other parties, and (3) enjoining a conveyance between two other
parties. Assuming arguendo that plaintiff has standing, plaintiff
could have instituted this lawsuit at the time of the 1994
conveyance, and therefore the action accrued not later than 1994.
Costin does not apply because this is not a case involving
professional malpractice.
Plaintiff also argues the correct limitations period is ten
years pursuant to N.C. Gen. Stat. § 1-56 (1999), as cited in Fulp
v. Fulp, 264 N.C. 20, 140 S.E.2d 708 (1965). Our Supreme Court in
Fulp stated in dicta that "[t]he ten-year statute applies when thetitle to property is at issue, not where, as here, the actio
n is
merely for breach of contract[.]" Fulp, 264 N.C. at 27, 140 S.E.2d
at 714 (citation omitted). This statement was made in the context
of trust law. See id. ("Were plaintiff the cestui que trust of a
resulting or a constructive trust, the ten-year statute would
apply[.]"). Indeed, N.C. Gen. Stat. § 1-56 has been applied mainly
in cases related to trusts, accountings, tax liens and fiduciary
duty. See, e.g., Tyson v. N.C.N.B., 305 N.C. 136, 286 S.E.2d 561
(1982) (action to impose constructive trust); Nunnery v. Averitt,
111 N.C. 394, 16 S.E. 683 (1892) (right to surcharge and restate a
final account); Bradbury v. Cummings, 68 N.C. App. 302, 314 S.E.2d
568 (1984) (tax lien foreclosure); Adams v. Moore, 96 N.C. App.
359, 385 S.E.2d 799 (1989), disc. review denied, 326 N.C. 46, 389
S.E.2d 83 (1990) (breach of fiduciary duty). N.C.G.S. § 1-56 does
not apply to this case.
In arguing for a ten-year limitations period, plaintiff denies
that the shorter limitations periods argued by defendants apply.
Defendants first argue for the application of N.C. Gen. Stat. § 1-
53 (1), providing a two-year limitations period for "[a]n action
against a local unit of government upon a contract, obligation, or
liability arising out of a contract, express or implied."
Alternatively, defendants ask us to apply the three-year
limitations period in N.C. Gen. Stat. § 1-52 (2) for "a liability
created by statute, either state or federal, unless some other time
is mentioned in this statute creating it."
In Liptrap v. City of High Point, 128 N.C. App. 353, 496S.E.2d 817, disc. review denied, 348 N.C. 73,
505 S.E.2d 873
(1998), current and retired city employees sued the City of High
Point claiming that the City's resolution freezing the amount of
their longevity pay and subsequent refusals to pay additional
amounts to those plaintiffs reaching greater increments of service,
constituted and continued to constitute breaches of their
employment contracts. The City argued that the plaintiffs' cause
of action accrued, and the two-year statute of limitations in
N.C.G.S. § 1-53 (1) began to run, upon the passage of the City's
1992 resolution freezing the amount of the longevity pay. Our
Court agreed, stating that the statute of limitations begins to run
as soon as the injury becomes apparent or should reasonably become
apparent, regardless of whether further damage could occur. Thus,
the plaintiffs' claims were barred. Liptrap, 128 N.C. at 356, 496
S.E.2d at 819.
Defendant RMH cites Colombo v. Dorrity, 115 N.C. App. 81, 443
S.E.2d 752, disc. review denied, 337 N.C. 689, 448 S.E.2d 517
(1994), in which the driver of a vehicle sued the City of Durham
for damages sustained in an accident on a state highway based on
the City's contract with the Department of Transportation to
maintain the state highway. Our Court held that any liability the
City might have for the accident would arise out of that contract,
but the two-year statute of limitations in N.C.G.S. § 1-53 (1)
applied. We therefore concluded that plaintiff's claim was barred
as the action occurred on 16 July 1988 and the complaint was filed
on 17 July 1991. Colombo, 115 N.C. App. at 86, 443 S.E.2d at 756. Our Court also applied N.C.G.S. § 1-5
3 (1) in Cooke v. Town of
Rich Square, 65 N.C. App. 606, 310 S.E.2d 76 (1983), disc. review
denied, 311 N.C. 753, 321 S.E.2d 130 (1984). In Cooke, the
plaintiff sued on a contract with the Town that provided the Town
was to repay plaintiff from the taxes and fees collected from the
residents of Cooke Circle once ten houses had been built in that
area. Ten houses had been built by 1970, and plaintiff instituted
the action in 1980. Our Court held that the plaintiff failed to
present his claim within the two-year statute of limitations
prescribed by N.C.G.S. § 1-53 (1) and his claim therefore was
barred. Cooke, 65 N.C. App. at 608, 310 S.E.2d at 78.
Similar to Liptrap, Colombo and Cooke, plaintiff's causes of
action against the County and the county commissioners in the case
before us to enjoin the conveyance and for a declaratory judgment
upon the validity of the conveyance, require the use of N.C.G.S. §
1-53 (1) for actions against a local unit of government upon
liability arising out of a contract. "A deed is a contract[.]"
Yopp v. Aman, 212 N.C. 479, 482, 193 S.E. 822, 824 (1937) (citation
omitted); see also Meachem v. Boyce, 35 N.C. App. 506, 510, 241
S.E.2d 880, 883 (1978) (citation omitted) ("The purported deed is
a contract to convey[.]"); Shingleton v. State, 260 N.C. 451, 454,
133 S.E.2d 183, 186 (1963) ("The easement in the instant case is by
deed, which is of course a contract."); Butler Drive Property
Owners Assn. v. Edwards, 109 N.C. App. 580, 584, 427 S.E.2d 879,
881 (1993) (citation omitted) ("An easement deed is a contract.").
Plaintiff's causes of action against the County and the countycommissioners are barred as they were filed on 21 August 1998 and
the deed conveying the hospital tract was executed on 28 March
1994. This result extends also to the quitclaim deed for personal
property located in the hospital, which was recorded on 20 February
1995.
Plaintiff alleges the same claims against defendants RMH and
FirstHealth, which are not local units of government. Therefore,
the general three-year limitations period for actions upon contract
liability applies to these claims. N.C. Gen. Stat. § 1-52 (1)
(1999). "[W]hen such a cause of action is targeted against a local
unit of government, the general three-year limitations period gives
way to a specific two-year limitations period provision created for
such a contingency." McCullough v. Branch Banking & Trust Company,
35 F.3d 127, 132 n.2 (4th Cir. 1994), cert. denied, 513 U.S. 1151,
130 L. Ed. 2d 1069 (1995). Again, plaintiff's action was filed on
21 August 1998 and even with a three-year limitations period its
cause of action was time-barred.
Plaintiff also challenges the constitutionality of Senate Bill
335 which absolves all defendants from their liability to plaintiff
for participating in the conveyance process without requiring
outside bids. In Rose v. Currituck County Bd. of Education, 83
N.C. App. 408, 350 S.E.2d 376 (1986), the plaintiff sought
reinstatement as a teacher in the defendant's school system, back
pay, and other benefits arising out of the defendant's alleged
violation of the teacher tenure act. The defendant argued that
because plaintiff resigned as a probationary principal, heautomatically forfeited his rights as a career teacher and the
dismissal procedures for career teachers were inapplicable. Our
Court disagreed with the defendant and held that plaintiff, as a
probationary principal, had a statutorily protected right as a
career teacher until he resigned as a career teacher, which could
not be stripped from him without proper notice and a hearing. The
defendant argued that the plaintiff's action was barred by the two-
year statute of limitations in N.C.G.S. § 1-53 (1), but our Court
stated that the applicable statute of limitations was the three-
year statute in N.C.G.S. § 1-52 (2) "upon liability created by
statute." Rose, 83 N.C. App. at 412, 350 S.E.2d at 379. We apply
the same limitations period to plaintiff's constitutional challenge
in this case for the reason that plaintiff's claim in the complaint
for "declaratory relief regarding constitutionality of Senate Bill
335" is a claim that some or all defendants are liable for creating
or following an unconstitutional law. Therefore plaintiff's
constitutional claim asserted is time-barred pursuant to N.C.G.S.
§ 1-52 (2).
Plaintiff's claims for a declaratory judgment as to the
conveyance of the hospital and for injunctive relief against the
County and the county commissioners are barred by N.C.G.S. § 1-53
(1). The same claims, as asserted against RMH and FirstHealth, are
not timely filed pursuant to N.C.G.S. § 1-52 (1). Finally,
plaintiff's claim for declaratory relief regarding the
constitutionality of Senate Bill 335 is also barred by the
limitations period in N.C.G.S. § 1-52 (2). The orders of the trial court are affirmed.
Affirmed.
Judges EAGLES and HORTON concur.
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