UNITED STATES BANKRUPTCY COURT DISTRICT OF SOUTH CAROLINA In re: ) ) Barnwell County Hospital, ) ) Debtor ) ______________________________)

Case No. 11-06207-dd Chapter 9

INTERVENORS MOTION TO DISMISS AND/OR STAY Pursuant to Rules 930 and 8005, Federal Rules of Bankruptcy Procedure, Intervenor Don Alexander moves to dismiss the bankruptcy petition (and vacate the orders associated therewith) and/or stay the sale of the Barnwell County Hospital.1 The grounds for the motion are as follows: On March 23, 2012, this Court permitted Alexanders Motion to Intervene for the purposes of challenging the eligibility of the Debtor under 9 U.S.C. 109. The Bankruptcy Code provides that, in order for a municipality to file for protection under Chapter 9, it must be specifically authorized, in its capacity as a municipality or by name, to be a debtor under such chapter by State law, or by a governmental officer or organization empowered by State law to authorize such entity to be a debtor under such a chapter[.] 9 U.S.C. 109(c)(2). A board of directors must be lawfully constituted in order to authorize the filing of a bankruptcy petition. In re Autumn Press, Inc., 20 B.R. 60 (D. Mass 1982); In re Acoustic Fiber Sound Systems, Inc., 20 B.R. 769 (S.D. Ind. 1982); In re County of Orange, 183 B.R. 594 (C.D. Calif. 1995). Alexander has consistently asserted that the Barnwell County Hospital Board was not properly constituted due to violations of the South Carolina Constitutional prohibition on dual office holding.

In addition, Intervenor moves for an expedited hearing on this matter; however, pursuant to Local Bankruptcy rule 9013-1(d), that motion is filed separately. 1

On May 23, 2012, this Court issued an Order Confirming Debtors First Amended Plan for Adjustment of Debts Pursuant to Chapter 9 of the Bankruptcy Code.2 After the sale of the hospital failed to close, the Debtors moved to substitute a new Asset Purchase Agreement. Over objection by Alexander and others, this Court granted the motion. However, this Court recognized the potential problems in proceeding, stating: Debtor is taking the risk that the appeal may result in a reversal of this Courts decision and its action in this case are void. In going forward with the Settlement Agreement and Substitution Motion, RHS and BCH Acquisitions Group also risk the appeal resulting in reversal and the possible consequences that might flow from such outcome. Order Granting Debtors Motion for an Order Authorizing Substitute Purchase Agreement in Aid of Implementation of the Plan and Approving the Notice and Application for Settlement and Compromise Between Debtor and SC Regional Health System, LLC [Dkt. No. 315], p. 7. Prior to his appearance in this Court, Alexander had filed a declaratory judgment on the dual office holding issue in state court. The circuit court dismissed Alexanders case, but in a recent opinion, the South Carolina Supreme Court unanimously reversed the decision and remanded the case. Alexander v. Houston, Shearouse Adv. Sh. 24 (May 29, 2013). The Supreme Court clearly stated: Respondents simultaneous service on the Council and the Board constitutes dual office holding in violation of the Constitution. Since the Supreme Court has ruled on the same issue before the District Court -- an issue involving the interpretation of state law -- the District Court will be constrained by that opinion. Thus, the Debtor would be ineligible here. Furthermore, Barnwell County Council has violated not only the prohibition on dual office holding, but also the prohibition against self-appointment. As recognized in a South Carolina
2

That Order is on appeal with the United States District Court. 2

Attorney General Opinion of September 12, 2011 (2011 WL 4592368, attached hereto as Exhibit A), public policy prevents county council from appointing one of its members to public office.... That opinion noted [a]t common law, an appointing body could not confer a public office on one of its members, even if that member abstained from the selection process. Id. The common law rule has been recognized by the South Carolina Supreme Court. See, Bradley v. City Council of Greenville, 212 S.C. 389, 46 S.E.2d 291 (1948). In Bradley, the Supreme Court held: [i]n the absence of constitutional or statutory provision it is, as said in 42 Am.Jur. 955, Public Officers, Sec. 97, contrary to public policy to permit an officer having an appointing power to use such power as a means of conferring an office upon himself.... Id., internal quotations omitted. Here, the entire Barnwell County Council conferred another office upon all of themselves in violation of law. Because Barnwell County Council had no authority to confer this office (in addition to the constitutional violations recognized by the Supreme Court), all actions taken by the Hospital Board in this Bankruptcy are void ab initio, including the election to file bankruptcy and decision to sell the Hospital.3 Cf. City of Huntsville v. COLSA Corp., 71 So. 3d 637, 638 (Ala. 2011) (where a trial court purports to exercise jurisdiction where it has none, every order and judgment entered pursuant thereto is void ab initio).
3

While there is a general rule that upon assumption of a second office a person is deemed to have abandoned his first office, and the person is considered only a de facto officer as regards the first office, that rule does not apply here. 1983 WL 181716 (S.C.A.G. Jan. 19, 1983) (Exhibit B). As the South Carolina Supreme Court noted, a de facto officer is [o]ne who is in possession of an office, in good faith, entered by right, claiming to be entitled thereto, and discharging its duties under color of authority. Smith v. City Council of Charleston, 198 S.C. 313, 17 S.E.2d 860, 863 (1941) (emphasis added). The Barnwell County Council did not act in good faith or enter office of Hospital Board member by right -- instead, the Council violated the prohibition on appointment against self-appointment.

Moreover, time is of the essence in this matter. The closing on the sale of the Hospital under the new Asset Purchase Agreement has now been scheduled for June 12, 2013.4 However, as the South Carolina Supreme Court has now issued an unequivocal opinion that the Barnwell County Council violated the prohibition against dual office holding, it is clear that the Barnwell County Board of Trustees was not properly constituted and could not have elected to file the bankruptcy petition. Thus, this case, including the orders approving the sale of the Hospital, must be dismissed. In the alternative, the June 12, 2013 sale date should be stayed. As discussed, it appears that the Debtor did not meet the eligibility requirements. While Intervenors appeal has not been ruled upon by the District Court, the Supreme Court has ruled on an issue involving the state constitution, and the District Court is constrained by that opinion. If the sale is allowed to proceed and Intervenor is subsequently successful on his District Court appeal, there will be irreparable harm as the sale will have already been consummated and there may be no way to restore the Hospital to its prior position. Intervenor respectfully suggests that the more prudent course of action, in light of the South Carolina Supreme Courts ruling, would be to stay the sale of the Hospital until the District Court rules on Alexanders appeal and the circuit court rules on the state court case upon remand. CONCLUSION Intervenor Don Alexander respectfully requests that this Court dismiss the bankruptcy petition of Debtor (and vacate the orders approving the sale of the Hospital), or, in the alternative, stay the sale of the Hospital currently scheduled for June 12, 2103.

The remittitur will not be issued before June 13, 2013. Therefore, it appears that the Debtor may be trying to accomplish the sale before the Supreme Courts decision is final. 4

s/A. Keith M. Babcock Keith M. Babcock, Fed. ID 1443 LEWIS, BABCOCK & GRIFFIN, L.L.P. 1513 Hampton St. Post Office Box 11208 Columbia, South Carolina 29211 (803) 771-8000 Attorneys for Intervenor Don Alexander Columbia, SC June 6, 2013