Glasgow Daily Times, Glasgow, KY

Local News

April 21, 2014

Appeal filed in T.J. Samson Community Hospital lawsuit

Attorney for Honeycutt claims changes to articles of incorporation, bylaws are invalid

GLASGOW — The attorney for a group seeking recognition as T.J. Samson Community Hospital’s rightful board of directors filed an appeal last week of a circuit judge’s ruling in favor of the hospital and its current board.

Special Judge Ken Howard found in December that original stockholders from the Glasgow hospital’s incorporation in 1926 lost the right to elect the hospital’s board of directors when articles of incorporation were amended in 1968, and that the current board is the rightfully elected panel.

Alan Simpson of Bowling Green, the attorney for Wendell Honeycutt – a descendant of an original stockholder and a Glasgow city councilman – filed a brief April 15 with the Kentucky Court of Appeals arguing the hospital was founded as a capital stock corporation and the stockholders therefore have the right to call an annual meeting to elect a board.

“Such a right was not provided to charitable, religious or educational associations, commonly now known as ‘not-for-profit’ or ‘non-stock’ corporations under the given statutes in effect at the time,” Simpson writes in the appeal.

Simpson claims subsequent changes to the hospital’s articles of incorporation and bylaws are invalid because they were made without stockholder input.

The hospital, meanwhile, argues that it was always intended to be a not-for-profit organization. Glasgow’s Jeff Herbert, an attorney for T.J. Samson, said Monday the brief filed last week is almost identical to the documents that were originally filed in Barren Circuit Court. While some of it is in a different order, Herbert said, it’s the same information.

“They have not brought anything new to the table; it’s just a regurgitation of what they had before, which the trial court saw fit to reject,” Herbert said.

The hospital’s attorneys have 60 days to file a response, Herbert said.

A group of people, including Honeycutt, met in May and elected what it believes should be the hospital’s board. Aside from Honeycutt, those claiming voting rights are Mary Roberta Boles Welch (who gave her proxy to D.T. Froedge), Robert A. Lessenberry and Robert P. Goodman (inheritor of three estates who gave all three proxies to Barret Lessenberry), according to the appeal document.

The voters unanimously selected by paper ballot the following board: Froedge, who was elected chairman; Honeycutt; Randall Curry; Dwayne Hatcher; Curtis Peil; and Lyon Hutcherson, who subsequently declined to serve.

Howard ordered earlier in 2013 that the entire group could not bring the lawsuit because it is not a legally recognized entity. Now, only Honeycutt’s name appears on the lawsuit.

“This is a case about whether a Kentucky corporation which was incorporated in 1926 was organized under the statues which govern capital stock corporations or those which govern religious, charitable and educational institutions,” Simpson says in the appeal. “If it was organized as a capital stock corporation, then do the subscribers/shareholders still retain the right to elect the board of directors?”

When what was originally called “The Community Hospital” was being created, anyone who contributed more than $25 toward funding it was considered a stockholder. Rather than being paid dividends, however, stockholders held the right to vote annually to elect a board of “trustees.”

Over the years, articles of incorporation spelling out the election process were revised, as were the hospital’s bylaws. Among the central questions of the original lawsuit, and now the appeal, is whether the board of directors had the authority to make such changes without a stockholder vote. Also at play is the question of whether stockholders’ voting rights are inheritable, because none of the original stockholders is living.

The appeal argues that if the hospital was formed as a capital stock corporation, then its board of directors could not legally have changed the organization “from one form to another without notice to and the vote of the shareholders.” Essentially, the claim is that the amended articles of incorporation from 1968 are invalid.

“The Hospital has admitted that it never communicated with its stockholders and that all of its records from 1926 through 1968 cannot be found,” the appeal says.

As in the original filing, the appeal goes step by step through the changing articles of incorporation and other documents, comparing them with wording of the laws of the times, and it discusses previous cases in relation to this one.

In conclusion, Simpson says the board election in May was held in accordance with the hospital’s articles of incorporation.

“It was a valid election which occurred after notice in the newspaper and by other means to all shareholders who qualified by inheritance,” the appeal says. “Mr. Honeycutt and five other voters were qualified. Their legal right to vote cannot be ignored. Likewise, their selection of a new board of the hospital cannot be ignored or usurped.”

Simpson has requested an oral argument before the appeals panel. Simpson says the issues in this case, including how former state laws and findings from other cases over nearly nine decades would have applied, make it “especially suited to oral argument.”

In addition, the case regards control of the only hospital in Barren County, “whose continuance and financial solvency is of great public concern,” he says in the appeal.

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