Commentary; Posted: 11/9/05
Loss of local control at risk in hospital site decisions
Richard Pecar
Guest Columnist
It should come as no surprise that Fairviewís attorney did not agree with allegations that Fairview is in default of its Lease with the Memorial Hospital District. Did anyone really expect Fairviewís attorney to say, ìWe did it, weíre guilty as charged, we are wrong, the lease is violated...î?
I remain firm in my opinion there are at least two violations of the lease. The first is that Fairview sublet the hospital facility to Lakes International School; and, the second is that Fairview made an implicit pledge to exercise a future purchase option in order to sell a fee title to a portion of the hospital property to Duffy Development Company. Duffy wants to build a 48-unit apartment complex on the property.
I donít know which violation came first because Fairviewís lease with the school hasnít been made public. It makes no difference because both appear to be defaults, and any appearance of impropriety must be investigated and be dealt with.
Itís a fact the stated purpose of the lease is for the ì...operation, administration and maintenance by Fairview (of the hospital facility) as a community hospital or healthcare or medical facility.î No other activities are contemplated in the lease.
Itís also a fact similar language is found in the state statutes which enabled Memorial Hospital District to organize, incorporate and to function as a political sub-division of the state. The hospital district, a municipal corporation, is subject to a stated and limited legal purpose under Chapter 447.31 to 447.50: ì...to acquire, improve, and run hospital and nursing home facilities that the hospital board decides are necessary and expedient.î
I realize these are legal technicalities. But, at this time, these technicalities cast a long shadow over the process of issuing city permits to construct an apartment complex on public land. I also realize some of these concerns may have a short shelf life. Thatís because Fairview may (or may not) acquire the right to purchase the property next year, and the hospital district most likely will dissolve and cease to exist after Fairviewís lease ends.
Fairviewís attorney has responded to the allegations of default related to the purchase agreement with Duffy. Two main points were made. First, the attorney stated ì...Fairview has agreed to sell the fee title to the property-not its interest in the leasehold created by the lease...î
The second point was, ìFairviewís sale of the property to third parties has nothing to do with the lease, except that Fairview happens to be acquiring the property by exercising its option to purchase the property contained in the lease.î
These interpretations are at best limited. When the 28-page lease is evaluated, the Fairview attorney is incorrect, in my opinion. First, Fairviewís option to purchase the hospital property doesnít currently exist, and it will not exist until after Jan. 1, 2006. More importantly, when it does exist, the purchase option is subject to all of the conditions of the lease, it is not a stand-alone right that just happens to be in the lease.
The Fairview attorney made it sound like the purchase option just happens to be in the lease, almost like it could be someplace else. The purchase option clearly states Fairview canít exercise the option if the lease is in default. The lease is in default, so go figure.
What happened is Fairview implicitly pledged to Duffy that it will exercise its purchase option in future, which is the only way Fairview can get the fee title. In turn, Duffy agreed to buy the property from Fairview if he gets the permits. The implicit pledge by Fairview is the legal basis of Duffyís purchase agreement.
Fairviewís default has nothing to do with assigning leasehold rights, but it has everything to do with making an implicit pledge to exercise a purchase option. The pledge is a clear violation of the lease unless prior written approval was obtained from the hospital board.
The attorney for the hospital board also responded to the allegations of default by stating ì...it is not entirely clear...î whether the purchase agreement with Duffy is a violation of the lease. The attorney indicated ì...it may require extensive legal research...î to determine if a violation exists. Come on now, give us a break! This is just a lease, a document with rights, obligations and restrictions! We arenít trying to interpret the Iraqi Constitution!
The board attorney also stated there are ì...no compelling legal reasons...î to call a special meeting of the hospital board to investigate the allegations. For those of you who donít know, the phrase ìno compelling legal reasonsî does not mean the same thing as no legal reasons at all. ìCompellingî is the key word, and two things that tend to be legally ìcompellingî are serving a legal complaint and the action of a court. These just may happen.
At this point, the hospital board has sought shelter behind these attorneyís interpretations, apparently believing they have permission to stonewall the allegation of default.
What is noticeably absent in the responses from both attorneys are quoted excerpts from the lease that do, in fact, prove Fairview has right to sublet the hospital facility, or that prove Fairview has the right to pledge to a third party it will exercise a future purchase option that may, or may not, exist. The reason neither attorney has pointed to language in the lease that approves subletting and/or a purchase agreement based on a pledge is because the language isnít in the lease. There is plenty of language in the lease that restricts Fairview to administering and operating hospital and medical center activities. But thatís it.
And while I am pointing at long casting shadows of the legal kind, there is another problem. The application Duffy submitted to the city on July 15th is deficient and does not comply with city ordinances. Duffyís application does not comply with city ordinance (Section 8.03 2. A, applications and procedures) which states, ìApplications must be submitted to city staff by the property owner or designated agent on forms provided by the city.î
The Memorial Hospital District, the propertyís owner, is not participating in the city application process at all, based on my review of the record on August 29th. No direct evidence has been provided to the city that the property owner is even aware of, or sanctions this project. The application submitted to the city states Memorial Hospital District is the property owner, but it shows the contact person as located in Minneapolis. No street address given, and the contact name for the hospital district and its phone number are for a person who works in the real estate division of Fairview.
Furthermore, Duffy has provided no evidence to the city that he, or any firm or individual listed on the city application is a designated agent of the property owner. The Fairview lease and purchase agreement with Duffy doesnít contain the term ìdesignated agentî anywhere.
In a nutshell, one could say that there are just too many unresolved legalities...as a matter of fact, one could say this project appears to be weighed down with legal irregularities.
The fate of the proposed apartment complex now rests with the Forest Lake City Council. I pray the council will take a stand for protecting the integrity of city ordinance and due process, will support the many Forest Lake residents and our planning commission, who advocate the permits requested by the developer are denied.
One final comment to those who may believe the proposed apartment complex is just a neighborhood issue. Itís not. This is a city-wide issue.
Big developments by interests from outside of a community is big news nowadays. What is at stake is our communityís ability to retain local control of the uses and development of publicly-owned land. ìLocal controlî should be of interest to all residents.
If, as a community, we have little or no say regarding the use of our publicly-owned lands, we will have even less say on future developments of privately-owned land. What is at my back door today, can be at your back door tomorrow. This is the very beginning of a battle to retain ìlocal control.î Itís a big issue that can take on many different forms. This is just one form, one that involves publicly-owned land.
And unless, or until, the city council upholds the planning commissionís recommendation to deny the developer the permits, we are at-risk of losing ìlocal controlî of our communityís right to pursue a vision of itself. We risk something else, even bigger than ìlocal control,î and that is the loss of due process...thatís a loss we canít afford to take.
Please attend the city council meeting Monday, Nov. 14th and urge the council to protect ìlocal controlî of our community!
Richard Pecar lives in Forest Lake and has been an interested party in development plans for the old District Memorial Hospital site.
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