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Jane Lipscomb Stone v. Washington Regional Medical Center

Court of Appeals of Arkansas, Division II

March 9, 2016

JANE LIPSCOMB STONE, Individually and as Executrix of the estate of MADOLENE STONE, deceased; BENJAMIN HICKS STONE, III; RUTH STONE JONES; MARGARET STONE COTTER; HARRIET STONE EVANS; PATRICIA MARTY STONE; EDWARD DURELL STONE, III; MARIA FRANCESCA STONE; FIONA CAMPBELL STONE; and MATTHEW WHELPLEY APPELLANTS
v.
WASHINGTON REGIONAL MEDICAL CENTER and CITY OF FAYETTEVILLE, ARKANSAS APPELLEES

APPEAL FROM THE WASHINGTON COUNTY CIRCUIT COURT [NO. CV-14-1288] HONORABLE CRISTI BEAUMONT, JUDGE

Ledbetter, Gogbill, Arnold & Harrison, LLP, by: R. Ray Fulmer, Victor L. Crowell, and Joseph Karl Luebke, for appellants.

Thomas J. Olmstead and Andrew C. Cozart, for appellee Washington Regional Medical Center.

Kit Williams and Blake Pennington, for appellee City of Fayetteville.

KENNETH S. HIXSON, Judge

This is an appeal from a decree quieting title to certain property in appellee Washington Regional Medical Center ("WRMC"). Appellants, the heirs at law of the original grantors, bring this appeal, arguing six points.[1] We affirm the circuit court.

Facts and Procedural History

In 1906, Stephan (or S.K.) and Amanda Stone ("the Stones") owned block 37 of the original town plat of Fayetteville, Arkansas. The Stones decided to gift the property to the City of Fayetteville (the "City") "as a testimonial of our affection for the people among whom we have passed our lives." The purpose of the gift was to "establish and maintain permanently a hospital which shall be known as the Stone Hospital."

In September 1906, the Stones executed a Warranty Deed (the "1906 Deed") that conveyed the property to the City. The 1906 Deed contained a reverter clause which would cause the property to be conveyed back to the Stones or their heirs in the event that either of two triggering events occurred. The 1906 Deed further established a Stone Hospital Board of Control ("Board of Control") to operate the Stone Hospital.[2]

Despite the conveyance in 1906, by 1909 Stone Hospital still had not been established. In February 1909, the Stones executed another warranty deed in favor of the City (the "1909 Deed"). The 1909 Deed contained a recital that explained the reason why the second deed was created. The recital provided: "Whereas, in said [1906 Deed] there are certain conditions providing for a reversion of the premises which may tend to retard the establishment and maintenance of said Hospital." There were two significant differences between the 1906 Deed and the 1909 Deed. First, the 1906 Deed retained a possibility of reverter in the Stones which could "retard" the establishment of the Stone Hospital; while the 1909 Deed omitted the language that created the possibility of reverter. Second, in the place of the possibility of reverter, the 1909 Deed added a condition to the conveyance which provided that if the hospital should change its location, the entire proceeds of the property should constitute a trust fund to be devoted to the maintenance of the hospital at the location selected; and, that any change in location would have to be approved by both the Board of Control named in the 1906 Deed and by the City.

The Stone Hospital was subsequently established and became operational in 1912. In 1914, the Board of Control petitioned the Washington County Circuit Court to be incorporated for the purpose of conducting a charitable hospital. The new corporation was known as Fayetteville City Hospital ("FCH"). The articles of incorporation were approved on April 30, 1914.[3]

The City owned and held legal title to the FCH property from 1906 until 1978, at which time the City transferred the FCH property to FCH. FCH continued to operate the facility until 1991. In July 1991, WRMC and FCH entered into an assignment and lease agreement. Under those agreements, WRMC operated a skilled-nursing and long-term-care facility on the FCH property.[4]

Unrelated to the WRMC/FCH lease agreement and the FCH property, in 2010 the City decided to construct a roundabout to ease traffic congestion near the WRMC campus in north Fayetteville. The City required one acre of land to construct the roundabout, and the City offered WRMC $172, 500 for a one-acre parcel. Instead of accepting cash for the one-acre parcel, WRMC offered to swap the roundabout site in exchange for the FCH property owned by the City. After what can best be described as a series of legal maneuvers (which are discussed below), the City agreed to the land swap. Subsequently, the FCH property was conveyed to WRMC, and the WRMC property was conveyed to the City.

In July 2014, WRMC filed suit seeking to quiet title to the FCH property. The Stone heirs were named as defendants. The petition asserted that, although the 1906 Deed created the possibility of reverter in the Stones, that possibility of reverter was released by the 1909 Deed in favor of a conveyance in trust for the benefit of the City.

The Stone heirs responded, contending that because the City failed to establish the Stone Hospital and failed to operate it pursuant to the terms of the trust, its actions constituted a rejection of the trust, and that title should be quieted in appellants. The heirs later filed amended answers and counterclaims to have title reinvested in them. WRMC filed an amended petition adding the City as a party. The City answered and sought to ...


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