Trustees of Watts Hospital v. Board of Commissioners , 231 N.C. 604 ( 1950 )

58 S.E.2d 696 (1950) 231 N.C. 604

TRUSTEES OF WATTS HOSPITAL et al.
v.
BOARD OF COM'RS FOR DURHAM COUNTY et al.

No. 740.

Supreme Court of North Carolina.

March 29, 1950.

Fuller, Reade, Umstead & Fuller, Durham, for defendants Durham County and Board of Com'rs for Durham County, appellants.

A. R. Wilson, Durham, for defendant A. R. Wilson, guardian ad litem, appellant.

Victor S. Bryant and Robert I. Lipton, Durham, for plaintiffs-appellees.

ERVIN, Justice.

Equity looks at substance, and not form. When subsequent changes in conditions not anticipated by the creator of a trust threaten the destruction of the trust and the loss of the trust estate, a court of equity has power to modify the terms of the trust to the extent necessary to preserve the trust estate and to effectuate the primary purpose of the creator of the trust. Moses H. Cone Memorial Hospital v. Cone, 231 N.C. 292, 56 S.E.2d 709; Redwine v. Clodfelter, 226 N.C. 366, 38 S.E.2d 203; Duffy v. Duffy, 221 N.C. 521, 20 S.E.2d 835; Penick v. Bank of Wadesboro, 218 N.C. 686, 12 S.E.2d 253; Cutter v. American Trust Co., 213 N.C. 686, 197 S.E. 542; 54 Am.Jur., Trusts, section 284. This equitable jurisdiction resided in the court below; for the Superior Court possesses all of the powers exercised by it as a court of equity prior to 1868. McIntosh: North Carolina Practice and Procedure in Civil Cases, section 62.

For all practical purposes, two trusts are involved in this action. The subject matter of the first is the Watts Hospital property, and the subject matter of the second is the Watts Endowment property.

The findings of fact of the court make it manifest that drastic changes in conditions, which were entirely unforeseen at the time of the creation of the trusts, arose subsequent to the establishment of the trusts; that these changes in conditions created an emergency, which threatened the destruction of the trusts and the loss of the trust estates to the trustee and the beneficiaries of the trusts; and that in consequence modification of the terms of the trusts by the court was indispensable to the preservation of the trusts and the carrying out of the primary purposes of the creator of the trusts. Moreover, both the findings of fact and the record as a whole compel the conclusion that the judgment modifying the terms of the trusts is well conceived to accomplish these laudable ends.

The circumstances in the record indicate beyond cavil that George W. Watts intended his charities to be as permanent and perpetual as any human institutions can be. The corporate charter of the Trustees of Watts Hospital clearly discloses that the primary purpose motivating his gift of the hospital property to the Trustees was the establishment of a non-profit hospital in Durham County "for the reception and treatment of persons who may need medical or surgical attendance during temporary sickness or injury." Under the statutes originally enacted as Chapter 933 of the 1947 Session Laws and now codified as Article 13B of Chapter 131 of the General Statutes, Durham County has plenary power to construct, operate, and maintain non-profit hospital facilities. For this reason, the sanctioned conveyance of the Watts Hospital property to Durham County upon the condition "that the * * * property shall be used for hospital purposes" insures the preservation of the trust estate for the benefit of the ultimate beneficiaries of the trust and the carrying out of the primary purpose of the creator of the trust for all time so far as these things can be done by human foresight and ingenuity in an uncertain world.

When George W. Watts gave the Watts Endowment property to the Trustees of Watts Hospital, his primary intent was to earmark the net income arising from such property for the service of poor patients unable to pay Watts Hospital for their board, attention, and nursing. The judgment makes it certain that the net income arising from this property will be used for the benefit of persons answering this description in conformity to the primary purpose of the creator of the trust throughout the foreseeable future.

The construction, maintenance, and operation of a public hospital by a county is a public purpose for which funds may be provided by taxation under Article V, Section 3, of the Constitution. See: Palmer v. Haywood County, 212 N.C. 284, 193 S.E. 668, 113 A.L.R. 1195; Burleson v. Spruce Pine, 200 N.C. 30, 156 S.E. 241; Nash v. Monroe, 198 N.C. 306, 151 S.E. 634; Armstrong v. Board of Com'rs, 185 N.C. 405, 117 S.E. 388. In consequence, "the cost of planning and acquiring, establishing, developing, constructing, enlarging, improving, or equipping any hospital facility or the site thereof may be paid for * * * from the proceeds of the sale of bonds or other obligations" of a county under G.S. § 131-126.23 if such action is first approved by a majority of the qualified voters of the county who shall vote on the proposition in an election conducted under the County Finance Act, i. e., Article 9 of Chapter 153 of the General Statutes as amended by Section 8 of Chapter 497 of the 1949 Session Laws.

Where a county is authorized to issue its bonds for these purposes by a majority of the qualified voters voting on the proposition in an appropriate election, the proceeds of the bonds may be expended for such purposes under the supervision of the board of commissioners of the county, or under the supervision of some officer, or board, or agency of the county designated by the board of commissioners pursuant to G.S. § 131-126.21. Besides, a county, which has acquired an existing hospital facility by purchase, gift, or otherwise, is expressly authorized by the statute to lease such facility to any nonprofit association or corporation for operation on such terms and subject to such conditions as will carry out the purposes of Article 13B of Chapter 131 of the General Statutes. G.S. § 131-126.20(C). Hence, the provisions of the judgment relating to the execution of operational leases and the expenditure of the proceeds of any bonds issued under the statutes cited above are proper.

The deeds from the trustees of Watts Hospital and the heirs and residuary devisees of George W. Watts and Annie Louise Hill convey to Durham County a base, qualified, or determinable fee. Paul v. Willoughby, 204 N.C. 595, 169 S.E. 226; Henderson v. Western Carolina Power Co., 200 N.C. 443, 157 S.E. 425, 80 A.L.R. 497; West v. Murphy, 197 N.C. 488, 149 S.E. 731. Notwithstanding this fact, the court rightly authorized Durham County to accept these deeds. For all practical purposes, they vest in Durham County title to the Watts Hospital property in fee simple absolute; for the estate which they convey will endure forever unless Durham County voluntarily ceases to use the property for hospital purposes or voluntarily changes the name of the hospital standing thereon. Indeed, the statute does not make the acquisition of title by the county a condition precedent to the extension of aid. G.S. § 131-126.26.

For the reasons given, the judgment of the trial court is

Affirmed.