(Proposed) Order Appointing Guardian Ad Litem

    In  T he

United States Court of Appeals
F or th e  F ourth  C ircuit

No. 8908

G. C. Simkins, Jr., et al., and United States of America,
Appellants,

Moses H. Cone Memorial Hospital, a corporation, et al.,

Appellees.

On Appeal from the United States District Court for the 
Middle District of North Carolina

BRIEF AND APPENDIX OF DEFENDANTS — 
APPELLEES THE MOSES H. CONE MEMORIAL 

HOSPITAL and HAROLD BETTIS, its Director

-v.-

H erbert  S. F alk

319 Southeastern Building 
Greensboro, North Carolina

. F. WILLIAMS, JR* Attorneys for the Defendants-Appellees 
The Moses H. Cone Memorial Hospital 
and Harold Bettis, its Director.

%



INDEX TO BRIEF

Page

Statement of the C a se _____________________________  1

Preliminary Statement___________ ..._________________  2

Argument _____________ ___________________________  3

I. T he F ederal C ourts D o N ot H ave Jurisdiction 

of Actions B y Individuals S eeking  R edress for 
the A lleged  Invasion o f  T heir C ivil R ights by  

O ther  Individuals or Private C orporations__  3

II. T he D efendants A re Private Persons and C or­

porations, and N ot In stru m en ta lities of G ov­
er n m en t  E ither  State or F e d e r a l _____________  5

(1) The method, of selecting the Trustees of the
Moses Cone Hospital does not affect the pri­
vate character of that corporation _________ 6

(2) The ad valorem tax exemptions of the two hos­
pitals do not affect their character as private 
corporations ____________________________  13

(3) The licensure of the two hospitals by the State
of North Carolina does not make them agen­
cies of the S ta te_______________      14

(4) The nursing programs at the Moses Cone Hos­
pital do not affect the private character of that 

corporation _____________________________  17

l



(5) The grants of Hill-Burton funds to the two hos­
pitals do not make them instrumentalities 
either of the Federal government or of the State 19

(6) Neither the Federal government nor the State
exercises any control over the two hospitals 
through the Hill-Burton A c t____________  22

(7) The whole is no greater than the sum of the
parts _____________________________    28

(8) In reference to the position of the American
Civil Liberties Union_____________________ 32

(9) In reference to the two individual defendants,.. . 32

III. T he C onstitutionality  of th e  C hallenged  Pro­

visions of the H il l -Burton  Act Is Irrelevant 
and Is N ot B efo re  th e  C ourt in  T his Action ..^ 33

Conclusion _______________________________________  37

ii



TABLE OF AUTHORITIES

Burton v. Wilmington Parking Authority,
365 U. S. 715 (1961) ____________ 5, 14, 29, 30, 31

Commonwealth of Pennsylvania v. Board of 
Directors of City Trusts of City of 
Philadelphia, 353 U. S. 230 (1957) ______________  12

Dartmouth College v. Woodward, 17 U. S.
(4 Wheat.) 518 (1819) _________________  8, 9, 10,

13, 24, 37

Eaton v. Board of Managers of James Walker 
Memorial Hospital, 164 F. Supp. 191 
(E.D.N.C. 1958), aff’d., 261 F. 2d 521 
(4th Cir. 1958), cert, denied, 359 U. S.

984, (1959) __________ ____________11, 12, 13, 17,
20, 30, 31, 32

Hampton v. City of Jacksonville, 304 F. 2d 320 
(5th Cir. 1962), cert. den. sub nom.
Ghioto v. Hampton, 9 L. Ed. 2d 170____29, 30, 31, 37

Harrison v. Murphy, 205 F. Supp. 449
(D. C. Del. 1962) _____________________________  30

Khoury v. Community Memorial Hospital, Inc.,
203 Va. 236,123 S. E. 2d 533 (1962) ____21, 24, 27, 37

Mitchell v. Boys Club of Metropolitan Police,
D. C., 157 F. Supp. 101 (D.C.D.C. 1957) 13, 14, 20

National Federation of Railway Workers v.
National Mediation Board, 110 F. 2d 529 
(D. C. Cir. 1940), cert, denied, 310 U. S.
628 (1940) ___________________________________  4

Norris v. Mayor and City Council of Baltimore,
78 F. Supp. 451 (D. C. Md. 1948) ________ 10, 13, 20



Shelley v. Kraemer, 334 U. S. 1 (1948) __________  22, 33

Watkins v. Oaklawn Jockey Club, 183 F. 2d
440 (8th Cir. 1950) ___________________________  33

Williams v. Howard Johnsons Restaurant,
268 F. 2d 845 (4th Cir. 1959) ...._ .._ .15 , 16, 17, 26

Williams v. Yellow Cab Co. of Pittsburgh, Pa.,
200 F. 2d 302 (3d Cir. 1952), cert, denied,
346 U. S. 840 (1953) __________________ ____ ...___ 3

28 U. S. Q , $1331 ______________________________ 3, 4

28 U. S. C ,  §1343 (3) ___________________________ 3, 4

42 U. S. C., §291 et seq__________ :________________ 19

42 U. S. C., §291 _____________________________ 23, 24

42 U. S. C., §291e (f) __________________________27, 33

42 U. S. C ,  §291m ________________________27, 28, 36

N. C. Gen. Stats., §20-7__________________________16

N. C. Gen. Stats., §20-50 ________________________ 16

N. C. Gen. Stats., §84-4_________________________ 16

N. C. Gen. Stats., §90-18________________________ 16

N. C. Gen. Stats, §90-29 ________________________ 16

N .C . Gen. Stats, §131-126.3_____________________14, 15

N. C. Gen. Stats, §131-126.4___________________ 14, 15

Private Laws of North Carolina, Session of 1913,
Chapter 400 _______________    7

Hearings before the Senate Committee on Education
and Labor on S. 191, 79th Cong, 1st Sess.______25, 26

iv



In T he

United States Court of Appeals
F or th e  F ourth  C ircuit

No. 8908

G. C. S im k in s , Jr ., et al., and U nited States of Am erica ,
Appellants,

M oses H . C one M em o rial H ospital, a corporation, et al.,
Appellees.

On Appeal from the United States District Court for the 
Middle District of North Carolina

BRIEF OF THE MOSES H. CONE MEMORIAL 
HOSPITAL and HAROLD BETTIS, its Director

STA TEM EN T OF TH E CASE

This action was instituted in the District Court ostensibly 
to redress grievances which were alleged to arise under the 
Fourteenth and the Fifth Amendments to the United States 
Constitution. The defendants asserted in the court below 
that the Fourteenth Amendment is concerned solely with 
State action and the Fifth Amendment solely with Federal 
action; that these defendants are private corporations and in­
dividuals and not in any way instrumentalities either of the 
State or of the Federal government, and that the District 
Court therefore had no jurisdiction of the subject matter of 
the action; and the defendants moved to dismiss the com­
plaint on that ground. Judge Stanley adopted this view in his



2

careful and admirably documented opinion of December 5, 
1962, and entered judgment on December 17, 1962, denying 
motions for summary judgment by the plaintiffs and the 
United States, and granting the motions of the defendants to 
dismiss the complaint and the pleading in intervention for 
lack of jurisdiction over the subject matter of the action. The 
matter is before this Court on appeal by the plaintiffs and the 
United States from that judgment.

PRELIM INARY STA TEM EN T

It is well not to forget—in small questions of Hill-Burton 
construction requirements and in large questions of consti­
tutionality—that we are before this Court, at this time and on 
this appeal, solely on the fundamental legal issue of the juris­
diction of the District Court over the subject matter of the 
action. The District Court does not have jurisdiction of ac­
tions by individuals seeking redress for the alleged invasion of 
their civil rights by other individuals or private corporations— 
and it is the position of the defendants that this is such an 
action, and nothing more.

The appellants have devoted a great deal of attention to 
making something more of the case. For the first time in the 
history of his office, the Attorney General of the United 
States, the King’s champion, has raised his lance against the 
King. He himself concedes that this action is “ exceptional” 
(U. S. Brief, p. 40), but greater candor would make the word 
“ unprecedented” — the defendants were able to find no prece­
dent for his action, and under inquiry in the court below, the 
Attorney General was able to cite no precedent. It is perhaps 
fortunate in these “exceptional” circumstances that the 
shadow of the windmill at which he is tilting does not actually 
fall across the present case.

The plaintiffs asserted in the court below that this was a 
case of first impression — but the case has actually been de­



3

cided many times before in reference to schools, and restau­
rants, and golf courses, and swimming pools, and even hos­
pitals, and the principles which govern it are well settled and 
have been thoroughly defined in this Circuit. If the facility— 
whether it be a restaurant, or a golf course, or a hospital — is 
a public one (in the constitutional sense), it is subject to the 
constitutional amendments and discrimination is unlawful 
under them. If the facility is a private one, however, it is not 
subject to the constitutional amendments — and the Federal 
courts do not even have jurisdiction to consider the matter of 
discrimination.

The issue of jurisdiction therefore hinges on the one basic 
question — no matter how it is phrased — of whether these 
defendant hospitals are public corporations in the constitu­
tional sense or private ones free from constitutional restraints.

ARGUM ENT

I. THE FEDERAL COURTS DO NOT HAVE JURISDICTION 
OF ACTIONS BY /INDIVIDUALS SEEKING REDRESS 
FOR THE ALLEGED INVASION OF THEIR CIVIL 
RIGHTS BY OTHER INDIVIDUALS OR PRIVATE COR­
PORATIONS.

The jurisdiction of the District Court in this action was 
invoked pursuant to Title 28, United States Code, Section 
1343 (3). (Complaint |[I, at 4 a ) . Under this section, neither 
diversity nor a jurisdictional amount is required, but the sec­
tion nonetheless has a limited application, and it confers origi­
nal jurisdiction upon the Federal District Courts to entertain 
those civil actions—and only those civil actions—which are 
founded on the Fourteenth Amendment and its implement­
ing legislation. Williams v. Yellow Cab Co. of Pittsburgh, 
Pa., 200 F. 2d 302, 307 (3d Cir. 1952), cert, denied, 346 U. 
S. 840 (1953). The jurisdiction of the District Court in this 
action was also invoked under Title 28, United States Code,



4

Section 1331 on the ground that the amount in controversy 
exceeded $10,000.00, and that the action was founded on 
invasions of the rights guaranteed by Section 1 of the Four­
teenth Amendment and by the Fifth Amendment. (Com­
plaint ([1, at 4 a ) .

The plaintiffs therefore relied for jurisdiction in the court 
below upon invasions of the guarantees of the Fourteenth 
Amendment under both Sections 1343 (3) and 1331, and of 
the guarantees of the Fifth Amendment under Section 1331; 
and it is clear that the District Court has no jurisdiction under 
either Section 1343(3) or Section 1331 unless the depriva­
tions alleged by the plaintiffs are deprivations of those rights 
guaranteed either by the Fourteenth Amendment or by the 
Fifth Amendment. The inhibitions of the Fourteenth Amend­
ment, however, are inhibitions solely against State action, and 
the inhibitions of the Fifth Amendment are inhibitions solely 
against Federal action; and neither Amendment applies to 
action by private persons or corporations.

“The guarantees of the 14th amendment, U.S.C.A. 
Const., relate solely to action by a state government, clearly 
absent here. Hence, any constitutional rights pertinent to the 
instant case are those guaranteed by the 5th amendment. De­
cisive of this constitutional issue is the established proposition 
that the 5th amendment relates only to governmental action, 
federal in character, not to action by private persons.” Vinson, 
Associate Justice, speaking in National Federation of Railway 
Workers v. National Mediation Board, 110 F. 2d 529, 537 
(D.C. Cir. 1940), cert, denied, 310 U. S. 628 (1940).

It is idle to cumulate citations, for these principles are well 
settled and have not been disputed by the appellants. Noth­
ing could be clearer than that “The guarantees of the Four­
teenth Amendment . . . relate solely to action by a state gov­
ernment,” and “ that the Fifth Amendment relates only to 
governmental action, federal in character, (and) not to action



5

by private persons” ; and with these premises, we are back 
again to the basic question which is determinative of the 
right of the plaintiffs to bring this action in the Federal courts: 
Whether The Moses H. Cone Memorial Hospital and the 
Wesley Long Community Hospital are private corporations, 
or public corporations either State or Federal in character.

II. TH E DEFENDANTS ARE PRIVATE PERSONS AND
CORPORATIONS, AND NOT INSTRUMENTALITIES OF
GOVERNMENT EITHER STATE OR FEDERAL.

The plaintiffs have taken exception (Plaintiffs’ Brief, p. 
34) to Judge Stanley’s undertaking to determine if the de­
fendant hospitals were “public corporations,” and they urged 
the court below to consider the “ totality” of governmental 
involvement. The word “ totality” is one upon which the 
plaintiffs have placed great emphasis, apparently on the basis 
of inferences drawn by them from the Burton case1 which 
have led them to conclude — or at least to suggest — that the 
whole is somehow greater than the sum of the parts. The 
plaintiffs do Judge Stanley an injustice, however, for he made 
it quite clear that in determining whether the defendants were 
subject to the constitutional amendments, he felt it “neces­
sary” — in his own words — “ to examine the various aspects 
of governmental involvement which the plaintiffs contend 
add up to make the defendant hospitals public corporations 
in the constitutional sense” (207a. Emphasis added), and 
after examining each such aspect, he then went on to con­
sider expressly the “Total Governmental Involvement and 
Participation” (217a) .

The plaintiffs still suggest in this Court that our question 
is “Whether the appellees’ contacts with government are suf­
ficient to place them under the restraints of the Fifth and

1 Burton v. Wilmington Parking Authority, 365 U. S. 715 (1961).



6

fourteenth Amendments against racial discrimination.” This 
may seem to the plaintiffs a more euphemistic inquiry than 
whether the defendant hospitals are “public corporations” or 
even “ public corporations in the constitutional sense”—but 
no amount of euphemism can conceal the ultimate spade. It 
is the same question still—and it can still be resolved only by 
the same examination of the “points of contact” of the de­
fendant hospitals with government which was made in the 
District Court.

The plaintiffs — in the court below — suggested five of
these points of contact of the defendant hospitals with gov­
ernment/ All were examined carefully and debated fully; it 
was determined that each was insignificant in itself, and that 
the whole was no greater than the sum of the parts; and Judge 
Stanley therefore determined that the defendant hospitals 
were not “ instrumentalities of government in the constitu­
tional sense” and are not “ subject to the inhibitions of the 
Fifth Amendment or the Fourteenth Amendment to the 
United States Constitution” (221a). These points of contact 
we are now here to debate once again.

(1) The method of selecting the Trustees of the Moses Cone
Hospital does not affect the private character of that
corporation.

The history of the Moses Cone Hospital and its Board of 
Trustees appears fully in our record and is summarized care­
fully by Judge Stanley in his opinion (198a), and we shall 
not belabor it here. The hospital was originally incorporated 
in 1911 as a private corporation under the general corporation 
laws of North Carolina. There were ten original incorpora­
tors, all of whom were private citizens and four of whom were 
members of the Cone family, and these ten incorporators were 
named as the first Board of Trustees of the corporation. The 2

2 All five apply to Moses Cone Hospital; only three of them apply to Wesley 
Long.



7

corporation was subsequently granted a legislative charter by 
a Private Act of the North Carolina General Assembly3 which 
‘'fully ratified, approved, and confirmed” the original Articles 
of Incorporation.

The charter of the hospital provided for a Board of Trus­
tees of fifteen members, three to be named by the Governor 
of North Carolina, one by the City Council of the City of 
Greensboro, one by the Board of Commissioners of the 
County of Guilford, one by the Guilford County Medical 
Society, and one by the Board of Commissioners of the 
County of Watauga. The charter then provided that Mrs. 
Bertha L. Cone (Mrs. Moses H. Cone), who was the founder 
and principal benefactor of the corporation, should have the 
power to appoint the remaining eight trustees so long as she 
might live; and that after her death or earlier if she should 
renounce her right to appoint, the eight trustees originally 
appointed by her should perpetuate themselves by the elec­
tion of the Board of Trustees (199a).

Mrs. Bertha L. Cone died in 1947, and the charter of the 
corporation was amended in 1961 to eliminate the appoint­
ment of one trustee by the Board of Commissioners of the 
County of Watauga. The eight trustees originally appointed 
by Mrs. Cone and the one trustee originally appointed by 
Watauga County, or a total of nine members of the fifteen- 
member Board, are now to be perpetuated through the elec­
tion of the Board of Trustees (199a).

The trustees appointed by public officials or agencies have 
always been a minority of the trustees of the corporation 
(199a) . There is no allegation or evidence whatever in our 
record that any of the appointors of the Moses Cone trustees 
have ever attempted to instruct or control their appointees as 
trustees, or to exert any control over the corporation through 
those appointees; or to indicate that the appointors have ever

3 Chapter 400, Private Laws of North Carolina, Session of 1913 ( 32a).



8

done anything more than to appoint distinguished private citi­
zens — “ eminent and respectable individuals” — to serve the 
corporation (cf. 208a).

The plaintiffs have advanced the theory that because six 
members of the Moses Cone Hospital’s fifteen-member Board 
of Trustees are named by public officials or agencies to serve 
the private corporation, this somehow affects the private char­
acter of the corporation. It is certainly not a new suggestion; 
it was made in 1819 in the Dartmouth College case,4 and per­
haps even then not for the first time. Dartmouth College 
was originally incorporated under a crown charter from 
George III dated December 13, 1769; and this original 
charter provided for twelve trustees, to be self-perpetuating. 
The original twelve trustees were all named in the charter 
by the crown, and among them were the Governor of the 
Province of New Hampshire, the President and two members 
of the Council of the Province, the Speaker of the House of 
Representatives in the Province, and “one of the assistants of 
our colony of Connecticut.”

It was obviously suggested there — as here — that because 
the trustees were appointed by public authority the corpora­
tion therefore became public, and Chief Justice Marshall 
said:

“ It has been urged repeatedly, and certainly with a de­
gree of earnestness which attracted attention, that the 
trustees deriving their power from a regal source, must 
necessarily partake of the spirit of their origin; * *  *  . The 
first trustees were undoubtedly named in the charter by 
the crown; but at whose suggestion were they named? By 
whom were they selected? The charter informs us. Dr. 
Wheelock had represented 'that, for many weighty rea­
sons, it would be expedient that the gentlemen whom he

4 Dartmouth College v. Woodward, 17 U. S. (4 Wheat.) 518 (1819).



9

had already nominated in his last will, to be trustees in 
America, should be trustees of the corporation now pro­
posed.' When, afterwards, the trustees are named in the 
charter, can it be doubted that the persons mentioned by 
Dr. Wheelock in his will were appointed? Some were 
probably added by the crown, with the approbation of 
Dr. Wheelock. Among these is the doctor himself. If any 
others were appointed at the instance of the crown, they 
are the governor, three members of the council, and the 
speaker of the house of representatives of the colony of 
New Hampshire. * * * The original trustees, then, or 
most of them, were named by Dr. Wheelock, and those 
who were added to his nomination, most probably with 
his approbation, were among the most eminent and re­
spectable individuals in New Hampshire.” 17 U. S. 
(4 Wheat.) 518,648-9.

It was held — in the Dartmouth College case in 1819 — 
that all of the trustees appointed by the crown were private 
trustees, and that neither their appointment by the crown 
nor the public offices held by half of their number affected 
the privacy of the corporation which they served as trustees. 
Mr. Justice Story, in a full discussion, then went on to formu­
late the classic distinction between public and private corpo­
rations:

“Another division of corporations is into public and 
private. Public corporations are generally esteemed such 
as exist for public political purposes only, such as towns, 
cities, parishes, and counties; and in many respects they 
are so, although they involve some private interests; but 
strictly speaking, public corporations are such only as are 
founded by the government for public purposes, where the 
whole interests belong also to the government. If, there­
fore, the foundation be private, though under the charter 
of the government, the corporation is private, however ex­



10

tensive the uses may be to which it is devoted, either by 
the bounty of the founder or the nature and objects of the 
institution.” 17 U. S. (4 Wheat.) 518, 668.

# #  #

“This reasoning applies in its full force to eleemosy­
nary corporations. A hospital founded by a private bene­
factor is, in point of law, a private corporation, although 
dedicated by its charter to general charity.” 17 U. S. (4 
Wheat.) 518,669.

$ *  *

“When, then, the argument assumes, that because the 
charity is public the corporation is public, it manifestly 
confounds the popular with the strictly legal sense of the 
terms. * * *  When the corporation is said at the bar to be 
public, it is not merely meant that the whole community 
may be the proper objects of the bounty, but that the gov­
ernment have the sole right, as trustees of the public 
interests, to regulate, control, and direct the corporation, 
and its funds and its franchises, at its own good will and 
pleasure.”  17 U. S. (4 Wheat.) 518, 671. (Emphasis 
added.)

It is as true today as it was in 1819 that trustees appointed 
by public agencies to serve a private corporation, as in our 
present case, do not thereby become public officials — any 
more than did the trustees of Dartmouth College because 
they were appointed by the crown. “To make a corporation 
public, its managers, trustees, or directors must be not only 
appointed by public authority but subject to its control. I 
understand this to be the well established general law result­
ing from both federal and state decisions.” Norris v. Mayor 
and City Council of Baltimore, 78 F. Supp. 451, 458 (D. C. 
Md. 1948). And even if these trustees did become public 
representatives in any sense by virtue of their appointments,



11

they have always been and still are in the minority here; and 
the Moses Cone Hospital therefore clearly remains — as the 
District Court found — a private corporation decisively con­
trolled by its private trustees who constitute (and have al­
ways constituted) a clear majority of its Board of Trustees.

In Eaton v. Board of Managers of James Walker Memo­
rial Hospital/  the James Walker Memorial Hospital was origi­
nally chartered by the General Assembly of North Carolina; 
and its original Board of Managers consisted of nine persons, 
three of whom were elected by the Board of Commissioners of 
New Hanover County and two by the Board of Aldermen of 
the City of Wilmington, and only four of whom were selected 
by Mr. James Walker. The Board of Managers was self-per­
petuating, and at the time the action was instituted, none of 
the original managers was still on the Board. The action was 
dismissed for lack of jurisdiction on the ground that the James 
Walker Memorial Hospital was a private corporation, and that 
the acts of discrimination complained of therefore did not 
constitute State action; and this Court affirmed the District 
Court decision saying “The plaintiffs rightfully confine their 
effort on this appeal to showing that the hospital is an instru­
mentality of the State. . . . We may not interfere unless there 
is State action which offends the Federal Constitution. From 
this viewpoint we find no error in the decision of the District 
Court for the facts clearly show that when the present suit 
was brought, and for years before, the hospital was not an in­
strumentality of the State but a corporation managed and 
operated by an independent board free from State control.” 
261 F. 2d 521, 525.

In our present case, no more than a minority of the Moses 
Cone Hospital trustees have ever been appointed by public 
authority. In the Eaton case, a majority of the original 5

5 164 F. Supp. 191 (E.D .N.C. 1958), affd ., 261 F. 2d 521 (4th Cir. 1958), 
cert, denied, 359 U. S. 984 (1959).



12

Board of Managers was appointed by public authority. In the 
Dartmouth College case decided in 1819, as we have seen, all 
of the original trustees were appointed by public authority; 
and lest this be thought to represent an archaic position, in 
the Girard College case, not ultimately disposed of until 1958, 
all of the trustees were again appointed by public authority. 
The plaintiffs have persistently cited the original Supreme 
Court decision in the Girard College case,6 and have persist­
ently ignored the subsequent history of that case; but this en­
tire history is detailed by Judge Soper in his opinion in the 
Eaton case, and the Girard College case shows unmistakably 
that the mere appointment of trustees by public authority does 
not affect the character of a private corporation or agency. 
The United States Supreme Court decision in the Girard 
College case in 1957 was based — in Judge Soper’s words — 
“ only on the ground that the managing board then in control 
of the college had been constituted an agency of the State by 
the enabling act and was therefore subject to the Fourteenth 
Amendment; but . . . the new board thereafter set up by the 
Orphans’ Court of Philadelphia, being composed of private 
citizens, was not a State agency and was therefore free to carry 
out the terms of the Girard will. . . . The court (i.e., the Su­
preme Court of Pennsylvania) also held that the removal of 
the old and the substitution of new trustees by the court did 
not constitute State action within the scope of the Amend­
ment; and it rejected the theory that State action is inherent 
in charitable trusts generally even if they are not administered 
by an agency of the State. We find no decision to the con­
trary.” 261 F. 2d 521, 526.

Judge Stanley decided in our present case — as Mr. Justice 
Story did in the Dartmouth College case — that the pertinent 
factor is not who appoints the trustees but who controls the 
corporation; and he refused to draw any inference from the

6 Commonwealth of Pennsylvania v. Board of Directors of City Trusts of City 
of Philadelphia, 353 U. S. 230 (1957).



13

mere fact that a minority of the Moses Cone Hospital’s pri­
vate trustees are appointed by public agencies to serve the 
private corporation. He then concluded that “The entire rec­
ord makes it quite clear that the Cone Hospital, originally 
chartered as a private corporation, is subject to no control by 
any public authority, and that the appointment of the minor­
ity members of its trustees by public officers and agencies has 
in no way changed the private character of its business” 
(208a) . The defendants submit that this conclusion is un­
assailable.

(2) The ad valorem tax exemptions of the two hospitals do 
not affect their character as private corporations.

The plaintiffs asserted in the District Court — and the de­
fendants agreed — that the two hospitals are exempt from ad 
valorem taxes assessed by the City of Greensboro and the 
County of Guilford, North Carolina. No authority was cited 
for the proposition that these tax exemptions in any way affect 
the private character of the defendant hospitals, and the Dis­
trict Court quite properly refused to draw any inference from 
the fact. It is common knowledge that virtually all charitable 
organizations are given tax exemptions — not only from mu­
nicipal and county ad valorem taxes but from state and fed­
eral taxes as well — and it can hardly be contended that all 
such charitable organizations thereby become governmental 
agencies. The defendant hospitals point out that the sugges­
tion is refuted, at least by implication since it was necessarily 
involved, in virtually all of the cases where public charities 
have been held to be private corporations. Dartmouth College 
v. Woodward, supra; Eaton v. Board of Managers of James 
Walker Memorial Hospital, supra; Norris v. Mayor and City 
Council of Baltimore, supra; Mitchell v. Boys Club of Metro­
politan Police, D. C., 157 F. Supp. 101 (D* C. D. C. 1957).



14

The plaintiffs imply (they actually said in the court be­
low) that tax exemption was a factor in the Burton case/ but 
this clearly puts the cart before the horse. The Supreme Court 
in the Burton case did point out that “ the fee is held by a tax- 
exempt government agency” ; but it was unmistakably clear 
that the agency was tax-exempt because it was a government 
agency, and not — as the plaintiffs would have it here — that 
it was a government agency because it was tax-exempt.

The District Court in Mitchell v. Boys Club of Metropoli­
tan Police, D. C., supra, 108, said, with some feeling, that “ If 
each time a government lends its assistance to a private institu­
tion it were to acquire that institution as an arm of govern­
ment, then government would indeed become a many armed 
thing” ; and if the “assistance” referred to by the Court were 
to include not only direct assistance but also the indirect en­
couragement afforded by relief from the burdens of taxation, 
then government at all levels would indeed become a monster 
even more monstrous than the “many armed thing” feared 
by the Court.

(3) The licensure of the two hospitals by the State of North 
Carolina does not make them agencies of the State.

The plaintiffs asserted in the court below that the two de­
fendant hospitals are required to be licensed by the State of 
North Carolina pursuant to North Carolina General Statutes, 
Section 131-126.3; and that these licenses are obtained by 
application to the North Carolina Medical Care Commission 
under Section 131-126.4. The District Court found, however, 
that every hospital in the State of North Carolina is required 
to secure such a license from the State through the Medical 
Care Commission (201 a) ;8 and it is quite obvious that if such

7 Burton v. Wilmington Parking Authority, 365 U. S. 715 (1961). See Plain­
tiffs’ Brief, p. 23.

8 See also the affidavit of William F. Henderson, Executive Secretary of the
North Carolina Medical Care Commission, Appellees’ Appendix p. laa.



15

a license were sufficient to constitute a hospital a government­
al agency, there could not be any such thing as a private hos­
pital in the State of North Carolina.

These two sections of the North Carolina General 
Statutes are short, and read as follows:

“ 131-126.3. Licensure. After July 1st, 1947, no person 
or governmental unit, acting severally or jointly with any 
other person or governmental unit shall establish, conduct 
or maintain a hospital in this State without a license. 
(1947, c. 933, s. 6.) ”

“ 131-126.4. Application for license. Licenses shall be 
obtained from the Commission. Applications shall be up­
on such forms and shall contain such information as the 
said Commission may reasonably require, which may in­
clude affirmative evidence of ability to comply with such 
reasonable standards, rules and regulations as may be law­
fully prescribed hereunder. (1947, c. 933, s. 6; 1949, c. 
920, s. 3.) ”

It is apparent that these are regulatory sections, and that 
the phrase “no person or governmental unit” becomes mean­
ingless if a “person” becomes a “governmental unit” 
through the mere fact of licensure; and it has been clearly 
established in this Court that the mere act of the State in 
licensing a private institution to carry' on its private operations 
cannot cause that private institution to become a govern­
mental agency. Williams v. Howard Johnson’s Restaurant, 
268 F. 2d 845 (4th Cir. 1959).

“The essence of the argument is that the state licenses 
restaurants to serve the public and thereby is burdened 
with the positive duty to prohibit unjust discrimination in 
the use and enjoyment of the facilities.

This argument fails to observe the important distinc­
tion between activities that are required by the state and



16

those which are carried out by voluntary choice and with­
out compulsion by the people of the state in accordance 
with their own desires and social practices. Unless these 
actions are performed in obedience to some positive provi­
sion of state law they do not furnish a basis for the pend­
ing complaint. The license laws of Virginia do not fill the 
void. Section 35-26 of the Code of Virginia, 1950, makes 
it unlawful for any person to operate a restaurant in the 
state without an unrevoked permit from the Commission­
er, who is the chief executive officer of the State Board of 
Health. The statute is obviously designed to protect the 
health of the community but it does not authorize state 
officials to control the management of the business or to 
dictate what persons shall be served.” Williams v. Howard 
Johnson’s Restaurant, supra, 847.

Many if not most of the activities of the individual are 
subject to regulation by government in this modern era, but 
the State does not thereby adopt, or attempt to control, all of 
the activities of the individual performed within the scope of 
the license granted. The doctors and dentists who are plain­
tiffs in this case, and the lawyers who represent them, are all 
required to be licensed by the State (N. C. Gen. Stats. 90-18, 
90-29, 84-4); and every automobile in North Carolina is re­
quired to bear, and every driver to carry, a license from the 
State (N.C.G.S. 20-50, 20-7). These are mere permits, how­
ever, and not franchises, and they are available to all who wish 
to and can qualify. It could hardly be contended that every 
such individual, by virtue of his license, is constituted an agent 
of the State performing governmental functions in exercising 
his permit; and it is difficult to see how any of these situations 
differs substantially from licensing a restaurant or a hospital. 
It is true that no one may engage in these activities unless he 
meets certain standards and secures a license from the State, 
but the suggested inference “ fails to observe” that no one is



17

required to practice medicine, or dentistry, or law, or to drive 
a car, or to operate a restaurant or a hospital, but that all of 
these are activities “which are carried out by voluntary choice 
and without compulsion by the people of the State in accord­
ance with their own desires and social practices.”

It is quite clear that licensing a restaurant does not con­
stitute State action. Williams v. Howard Johnsons Restau­
rant, supra. It is equally clear that licensing a hospital does 
not constitute State action. Eaton v. Board of Managers of 
James W alker Memorial Hospital, supra.

(4) The nursing programs at the Moses Cone Hospital do not 
affect the private character of that corporation.

The plaintiffs alleged in their complaint that the Moses 
Cone Hospital conducts training and is regularly used as a 
place of training for student nurses from the Woman’s Col­
lege of the University of North Carolina and the Agricultural 
& Technical College of North Carolina, both of which are tax- 
supported public institutions under the laws of the State of 
North Carolina; and that in the course of this training “ these 
student nurses substantially contribute, without charge to the 
hospital, valuable nursing services for which it would other­
wise pay substantial sums” (12a). The implication and the 
argument was that this constituted a contribution by the State 
to the Moses Cone Hospital.

The Moses Cone Hospital then demonstrated that it does 
not receive any such contribution from the student programs, 
but that on the contrary it has contributed very substantially 
of its funds and its facilities to the furtherance of these two 
educational programs (55a, 181a, 184a, 204a). The plaintiffs 
then reversed their field, and argued that because the Moses 
Cone Hospital assists the State in this way, it somehow be­
comes an instrumentality of the State — doing the work of the 
State in the place of the State. It was to this position that



18

Judge Stanley directed his attention, and it can fairly be said 
that he did not have any difficulty with it (212-13a). If con­
tribution by the State does not constitute the recipient an in­
strumentality of government — and the United States con­
cedes that it does not (U. S. Brief, p. 19) — it can hardly be 
contended that contribution to the State would make the 
donor an instrumentality of government.

We are now back to midfield before this Court — and 
these nursing educational programs are no longer urged either 
as a contribution by the State or as a contribution to the State, 
but instead now constitute a “ joint endeavor” by the hospital 
and the State (Plaintiffs’ Brief, p. 36). It is truly a moving 
target, but the entire arc of this pendulum of argument ig­
nores the fact that both nursing programs are wholly volun­
tary on both sides — between the Colleges on the one hand 
and the Moses Cone Hospital on the other. The hospital has 
no obligation to either of the Colleges except that which it 
has voluntarily assumed; and each College uses the facilities 
of the hospital to the extent, and only to the extent, that the 
hospital has voluntarily agreed it may use them. Neither Col­
lege in any way controls or directs the policies or the opera­
tions of the hospital; and the hospital, on the other hand, does 
not in any way control or direct any facet of these nursing 
educational programs (212-13a).

It seems perfectly clear that the Woman’s College of the 
University of North Carolina and the Agricultural & Techni­
cal College of North Carolina are agencies of the State, and 
that their nursing educational programs are State activities. 
But those activities are completely controlled by the Colleges 
— the State has not “ delegated” or “ authorized” or “ acqui­
esced in” the exercise of its educational function by the Moses 
Cone Hospital (See Plaintiffs’ Brief, p. 22, n. 30) — and it 
hardly seems reasonable to suggest that because the hospital 
permits a portion of those activities to be carried on under the



19

control of the Colleges in its facilities, or that because the hos­
pital contributes funds to the furtherance of those activities, 
it thereby becomes an agency of the State.

(5) The grants of Hill-Burton funds to the two hospitals do 
not make them instrumentalities either of the Federal 
government or of the State.

The Moses Cone Hospital and the Wesley Long Hospital 
have both received Federal funds under the Hill-Burton Act9 
in aid of their construction and expansion programs, and these 
funds were allocated to these hospitals by the North Carolina 
Medical Care Commission, an agency of the State of North 
Carolina (213-14a) .

Whether the Federal government should contribute funds 
to a segregated private facility is one question — whether of 
ethics, of morality, of policy, or simply of politics; and whether 
the Federal government can constitutionally contribute funds 
to a segregated private facility — under the Hill-Burton or 
under any other Act — is another question;10 and both ques­
tions would appear to be equally irrelevant to our present in­
quiry. For the appellants in this action do not seek to prevent 
the contribution of funds under the Hill-Burton Act. They 
suggest instead that the Hill-Burton Act is unconstitutional, 
and that because it is, the contribution of funds to a private 
facility under the Act (even though made and accepted on 
definite and clearly understood conditions) nonetheless some­
how infects that facility with a loss of its privacy and private 
character, and makes it instead an instrumentality of the Fed­
eral government subject to the inhibitions of the Fifth Amend­
ment — and because the allocation of Federal funds is made 
through the Medical Care Commission, makes it an instru­
mentality of the State as well subject to the inhibitions of the

9 Title 42, United States Code, Sec. 291 et seq.
The Attorney General says that it can (U. S. Brief, p. 39).10



20

Fourteenth Amendment.

It is quite clear that this is not the law. “ It is well settled 
that aid given by a government to a private corporation is not 
enough in itself to change the character of the corporation 
from private to public.” Mitchell v. Boys Club of Metropoli­
tan Police, D. C., supra, 107. The Attorney General concurs: 
“Nor do we urge that the receipt of government financial aid 
is sufficient, without more, to deprive an otherwise private 
institution of its non-governmental character.” (U. S. Brief, 
p. 19) . It is equally clear (and particularly in this Circuit) 
that government control — and not government contribution, 
whether direct or indirect — is the decisive factor in the deter­
mination of whether a corporation is public or private. Eaton 
v. Board of Managers of James Walker Memorial Hospital, 
supra; Norris v. Mayor and City Council of Baltimore, supra; 
Mitchell v. Boys Club of Metropolitan Police, D. C., supra.

The Federal government would indeed be a “ many armed 
thing” if it acquired every private organization to which it 
contributes — and it surely cannot be argued that it acquires 
only those organizations to which it contributes unconstitu­
tionally, and not those to which it contributes properly. Con­
tribution by government — whether constitutionally made 
or improperly made — is contribution still, and nothing more. 
In the Eaton case, the City of Wilmington and the County 
of New Flanover had contributed funds to the James Walker 
Memorial Flospital for many years under State legislation 
which was subsequently held unconstitutional under the 
North Carolina Constitution. Thus all of these contributions 
were unconstitutionally made. But control — and not contri­
bution — is the decisive factor; and this Court looked to con­
trol, and held that the James Walker Memorial Hospital “was 
not an instrumentality of the State but a corporation man­
aged and operated by an independent board free from State 
control.” 261 F. 2d 521, 525.



21

The provisions of the Hill-Burton Act have had recent 
consideration by the Supreme Court of Appeals of the Com­
monwealth of Virginia in Khoury v. Community Memorial 
Hospital, Inc., 203 Va. 236, 123 S.E. 2d 533 (1962). The 
hospital there was a non-stock, non-profit corporation char­
tered under the laws of Virginia to establish, construct, and 
maintain a regional hospital, and somewhat more than half 
of its construction funds had been contributed by the Fed­
eral government under the Hill-Burton Act, another portion 
had been contributed by the Commonwealth of Virginia, and 
the balance had been provided by local subscriptions. The 
management of the hospital was vested in a self-perpetuating 
board of trustees.

The Virginia Court had these things to say:

“We next turn to the question of whether the use of 
federal and state funds for construction thereby consti­
tuted the hospital a public corporation.

“The distinctions between a public and a private cor­
poration have been so carefully drawn and so long recog­
nized that we experience no difficulty in answering the 
question in the negative.”

[The Court then cited, and quoted from, the Dart­
mouth College case.]

“The hospital is not owned by the federal or the state 
government, albeit federal and state funds may have made 
its construction possible. It is not an instrumentality of 
government for the administration of any public duty, al­
though the service it performs is in the public interest. Its 
officers are not appointed by and are not representatives 
of government, notwithstanding that their authority stems 
from legislative enactments. Under these circumstances, 
the hospital falls squarely within the time-honored defi­
nition of a private corporation.”



22

# # #

“The hospital was established pursuant to a charter, 
granted by the Commonwealth, conferring upon its public 
spirited organizers the right and authority to operate as a 
private corporation. That charter is a contract between 
the state and the incorporators. One of the unwritten 
provisions of that contract is that the trustees of the cor­
poration shall have the right to conduct its affairs as they 
might, in their sound discretion, see fit. Inherent in the 
charter is the understanding that, except as provided by 
law, the state will not interfere in the corporation’s inter­
nal affairs.”

Control and not contribution is the decisive factor, and 
the mere contribution of Federal funds under the Hill-Burton 
Act therefore clearly cannot change the character of a recipi­
ent from private to public, or constitute that private recipient 
an agency of the Federal government; and a fortiori the mere 
fact that the Federal funds were allocated to the private re­
cipient through a State agency cannot constitute that private 
recipient an agency of the State. The private corporations 
clearly remain private despite the contributions, and the 
Fourteenth and the Fifth Amendments erect no shield against 
their “ merely private conduct, however discriminatory or 
wrongful.” Shelley v. Kraemer, 334 U. S. T 13 (1948).

(6) Neither the Federal government nor the State exercises 
any control over the two hospitals through the Hill- 
Burton Act.

The appellants have apparently come to agree—with Judge 
Stanley and with the decided cases — that control, and not 
contribution, is the decisive factor in determining whether a 
corporation is a private one or a public one in the constitu­
tional sense, for in this Court the Hill-Burton program has 
now become “ the Hill-Burton hospital system,” a misnomer



23

implying a continuing supervision which the Act itself ex­
plicitly disclaims.

The Hill-Burton Act does not provide for the construction 
of hospitals by the Federal government or by the States, but 
simply undertakes “ to assist in the construction of public and 
other nonprofit hospitals.” 42 U. S. C. Sec. 291 (b ). Yet the 
appellants are apparently contending that when a private hos­
pital accepts Hill-Burton funds in aid of its own construction 
program, it is thereafter assuming to act for the State in “per­
forming an essential governmental function” (Plaintiff’s Brief, 
p. 29), and “ that such a non-governmental institution be­
comes pro tanto a State instrumentality with concomitant 
obligations” (U. S. Brief, p. 20). This contention, however, 
ignores the fact that the only logical conclusion to be drawn 
from these illogical premises is that a private hospital which 
does not receive any financial aid at all from government, is 
shouldering the assumed burden “pro even more tanto” — so 
that under this reasoning, the more private it is, the more 
public it would become.

It is difficult to see why this reasoning should apply to 
hospitals when it does not apply to other fields which suggest 
it much more strongly. The State has actually undertaken to 
provide educational opportunity for its citizens, for example 
— a true commitment; and it is simply underlining the obvious 
to point out that Duke University (like Dartmouth College), 
by its mere existence, lightens the burden of that commitment 
“ pro tanto.” Yet Duke University (like Dartmouth College) 
was privately endowed and is privately controlled; it has joined 
no State “ system” ; and (like Dartmouth College) it is clearly 
a private institution, and not an instrumentality of 
government.

The Hill-Burton Act, as we have seen, does not require 
the State to construct hospitals, and while the State may be 
interested in fostering the development of adequate facilities,



24

it has made no commitment to hospital care as it has to edu­
cation. A private hospital (like a private college) may be do­
ing something useful and generally approved whether or not 
it has received Federal or State funds, but it enjoys no fran­
chise or monopoly, and it is quite obvious that it is not shoul­
dering any burden for the State or relieving the State of any 
legal obligation and that such a private hospital “ is not an in­
strumentality of government for the administration of any 
public duty, although the service it performs is in the public 
interest.” Khoury v. Community Memorial Hospital, Inc., 
supra, 123 S. E. 2d 533, 538. The Attorney General here 
does not attack the “ rule” — and the word is his — “ that an 
otherwise private institution is not subject to the nondiscrimi­
nation provisions of the Constitution merely because . . .  it is 
generally open to the public” (U. S. Brief, p. 19); and Mr. 
Justice Story pointed out in 1819 the danger of assuming 
“ that because the charity is public the corporation is public” 
and emphasized specifically that “A hospital founded by a pri­
vate benefactor is, in point of law, a private corporation, 
although dedicated by its charter to general charity.” Dart­
mouth College v. Woodward, supra, 671, 669.

The popular name of the Hill-Burton Act — given it by the 
Congress — is the “ Hospital Survey and Construction Act.” 
The declared purpose of the Act is to assist in the inventory 
of existing facilities, “ to assist in the construction of public 
and other nonprofit hospitals,” and to authorize research and 
experiment for the effective development and utilization of 
services and facilities (42 U.S.C. 291) ; and it is again appar­
ent (as in the case of the North Carolina Hospital Licensing 
Act) that if the assistance rendered a private nonprofit hos­
pital under the Act makes that hospital a public one, the 
phrase “public and other nonprofit hospitals” becomes 
meaningless.11

11 The Attorney General doffs his cap to this suggestion. U. S. Brief, p. 28.



25

If there is a “ Hill-Burton hospital system” — as the ap­
pellants suggest — it is a truly secret society, for while many 
“public and other nonprofit hospitals” have applied and quali­
fied for Hill-Burton funds, no instance is cited where any hos­
pital has either joined the “ system” or been drafted into it 
without receiving a grant-in-aid. The parties agreed in the 
court below — and Judge Stanley found — “ that the Hill- 
Burton funds received by the defendant hospitals should be 
considered as unrestricted funds” (214-15a); and it is evident 
that they were unrestricted except for the minor limitations on 
and conditions of the grants-in-aid. And we have already seen 
(and the United States has agreed) that the receipt of gov­
ernmental aid is not “ sufficient, without more, to deprive an 
otherwise private institution of its non-governmental charac­
ter.” (U. S. Brief, p. 19) .

The United States has also virtually conceded that the 
Hill-Burton Act does simply establish a program of grants-in- 
aid (U. S. Brief, p. 29, and n. 20); and indeed this virtual 
concession would appear virtually inescapable, for in addition 
to the portions of legislative history cited by the Attorney 
General, the following colloquy took place at the hearings on 
the Bill before the Senate Committee on Education and 
Labor:

“ Senator Taft. Dr. Smelzer, as I understand it, and as 
the Surgeon General says, there shall be so many dollars, 
$100,000,000; say $5,000,000 allotted to the State of 
Ohio, that in Ohio, say, the Federal grant will be 50 per­
cent, then any private hospital can apply for that grant.

Dr. Smelzer. Yes, sir.

Senator Taft. And then the Surgeon General may 
grant that Federal grant directly, we will say, for the en­
largement of the private hospital, and when that money is 
gone that is owned by the private hospital, is it not?



26

Dr. Smelzer. Yes, sir.
Senator Taft. It is a gift for that particular private 

hospital.
Dr. Smelzer. Yes, sir.”
(Hearings before the Senate Committee on Education 

and Labor on S. 191, 79th Cong., 1st Sess., p. 22).

It should be remembered—in considering all of the “ re­
quirements” of the Hill-Burton Act which are detailed by the 
appellants — that the Hill-Burton Act does not actually “ re­
quire” anything of anyone, for no hospital is required to ac­
cept Hill-Burton funds. The appellants fail—in the words of 
this Court—“to observe the important distinction between ac­
tivities that are required by the state and those which are car­
ried out by voluntary choice and without compulsion by the 
people of the state in accordance with their own desires and 
social practices.” Williams v. Howard Johnsons Restaurant, 
supra, 847. All of the so-called “ requirements” of the Hill- 
Burton Act are purely and simply “conditions of the grant” 
to be accepted or rejected voluntarily by a private non-profit 
hospital. If it wants the money, then the hospital accepts the 
conditions of the grant; but this is a “voluntary choice” made 
“without compulsion” and not obedience to mandate; nor is 
it an abject surrender of privacy, but instead a simple accept­
ance of agreed conditions in clearly-defined areas of agree­
ment.

It should also be noted that the Hill-Burton Act does not 
in any way “ authorize” or “ sanction” discrimination, and that 
it does not say affirmatively to any hospital that it may dis­
criminate. It does require — as a condition of the grant of 
Federal funds — that the State plan (if the State wishes to 
participate) shall provide for adequate hospital facilities 
“without discrimination.” It further provides that the Sur­
geon General “ may” by regulation require of any applicant



27

hospital — if such hospital wants a grant of funds — an assur­
ance that there will be no discrimination; and the Act then 
provides that under certain circumstances, the Surgeon Gen­
eral shall waive this assurance of non-discrimination which he 
was not required to exact from the applicant to begin with. 
42 U. S. C. Sec. 291e ( f ) .

Nowhere, however, does the Hill-Burton Act “authorize” 
or “ sanction” or even “affirmatively permit” discrimination. 
At most, it simply provides that in the stipulated circum­
stances the assurances of non-discrimination normally exacted 
as conditions of the grant shall be waived, so that the appli­
cant under these stipulated circumstances may qualify for 
Hill-Burton funds without agreeing to any limitations of (and 
quite obviously without receiving any dispensations to en­
large) its otherwise lawful conduct in this area. And finally, 
even when the assurances of non-discrimination are not 
waived but are exacted as conditions of the grant of funds, 
those assurances relate wholly and solely to non-discrimination 
in the admission of patients; the Act does not deal in any way 
or to any extent (even as a condition of the grant) with the 
matter of staff admissions.

It should be abundantly clear that all of the “ require­
ments” of the Hill-Burton Act are purely and simply condi­
tions of the grant of funds, for the Act itself — as the Vir­
ginia Court in the Khoury case pointed out — expressly dis­
claims any Federal control over the hospitals to which Federal 
funds are contributed under the Act. Title 42, United States 
Code, Section 291m provides as follows:

“ 291m. State control of agencies

Except as otherwise specifically provided, nothing in 
this subchapter shall be construed as conferring on any 
Federal officer or employee the right to exercise any super­
vision or control over the administration, personnel, main-



2 8

tenance, or operation of any hospital, diagnostic or treat­
ment center, rehabilitation facility, or nursing home with 
respect to which any funds have been or may be expended 
under this subchapter.”

The appellants have apparently had some difficulty with 
Section 291m, which they have attempted to alleviate by 
suggesting here that the Federal government does exercise 
control but does so through the State agency. This sugges­
tion, however, ignores the fact established in the court below 
that The North Carolina Medical Care Commission (which 
is the relevant agency of the State) disclaims any authority, 
and makes no attempt, to exercise any supervision or control 
over the administration, personnel, maintenance, or operation 
of any hospital licensed by it under the North Carolina Hos­
pital Licensing Act, whether such hospital has received or has 
not received Hill-Burton funds; and that the Attorney Gen­
eral of the State of North Carolina has ruled that The North 
Carolina Medical Care Commission has no such authority.12

Judge Stanley concluded below that “no state or federal 
agency has the right to exercise any supervision or control 
over the operation of either hospital by virtue of their use of 
Hill-Burton funds, other than factors relating to the sound 
construction and equipment of the facilities, and inspections 
to insure the maintenance of proper health standards.” (217a). 
In the face of Section 291m and the unequivocal position of 
The North Carolina Medical Care Commission and the Attor­
ney General of the State of North Carolina, it is difficult to 
see how this conclusion can be challenged.

;(7) The whole is no greater than the sum of the parts
The defendants did contend in the court below that each

12 See the affidavit of William F„ Henderson, Executive Secretary of The North 
Carolina Medical Care Commission, and the Opinion of the Attorney Gen­
eral of the State of North Carolina dated 10 February 1962 and filed below 
with that affidavit, both of which are printed herewith, Appendix, p. laa. It 
may be significant that in printing their voluminous appendix of 225 pages, 
the appellants omitted to bring forward these particular documents.



2 9

of these points of contact of the two hospitals with govern­
ment which were suggested by the plaintiffs is insignificant in 
itself — and that the whole could be no greater than the sum 
of the parts (218a). The plaintiffs, on the other hand, seemed 
to feel that some magic in the phrase “ totality of govern­
mental involvement” could abrogate both mathematics and 
common sense so that five times zero would equal five and not 
zero; and as Judge Stanley indicated, they cut this wand from 
the Burton case (217a) .13

It might be pointed out initially that the points of con­
tact in the Burton case were far more numerous and far more 
substantial than anything which has even been suggested here 
—the restaurant in Burton, simply for a starter, was a lessee in 
a building owned, operated, heated, and structurally main­
tained by the Wilmington Parking Authority, a tax-exempt 
government agency — and Judge Gewin’s careful analysis of 
the Burton case in his dissenting opinion in Hampton v. City 
of Jacksonville1,1 makes this abundantly clear, by weight and 
by measure. But it is hardly necessary to sift these points of 
contact straw by straw, for the Burton case, by its own defini­
tion, is purely and simply a leasing case, a recognized category 
of cases adverted to by Judge Stanley below (217-18a), by the 
Attorney General here (U. S. Brief, p. 17, n. 10), and by Mr. 
Justice Clark for the majority (there were three dissents) in 
the case itself when he carefully limited his holding to the 
specific facts of the case:

“ Because readily applicable formulae may not be fash­
ioned, the conclusions drawn from the facts and circum­
stances of this record are by no means declared as uni­
versal truths on the basis of which every state leasing 
agreement is to be tested. *  *  *  Specifically defining the 
limits of our inquiry, what we hold today is that when a

13 Burton v. Wilmington Parking Authority, 365 U. S. 715 (1961).
14 304 F. 2d 320 (5th Cir. 1962), cert. den. sub nom. Ghioto v. Hampton, 

9 L. Ed. 2d 170.



3 0

State leases public property in the manner and for the 
purpose shown to have been the case here, the proscrip­
tions of the Fourteenth Amendment must be complied 
with by the lessee as certainly as though they were bind­
ing covenants written into the agreement itself.” Burton 
v. Wilmington Parking Authority, 365 U. S. 715, 725-6 
(1961). Compare Harrison v. Murphy, 205 F. Supp. 449 
(D. C. Del. 1962).

The plaintiffs also now rely in this Court on Hampton v. 
City of Jacksonville which found State action where two city- 
owned golf courses were conveyed to purchasers subject to a 
possibility of reverter if the properties were not forever used as 
golf courses. Judge Gewin wrote a strong and well-reasoned 
dissent: Judge Jones concurred specially on the sole ground 
that the reverter clause was calculated and “ intended” by the 
City to effect discrimination; and the case therefore rests on 
Chief Judge Tuttle’s theory that a possibility of reverter as­
sures “ complete present control.” 304 F. 2d 320, 322. This 
position not only deliberately refuses to accept the holding of 
the Eaton case — which has flatly ruled on the same problem 
in this Circuit — but (as Judge Gewin points out) also ignores 
the reasoning of that case. In the Eaton case, Judge Gilliam 
pointed out in the District Court that “The only way the City 
and County can claim an interest in the property or any con­
trol over the property would be in the event that the hospital 
ceased to be used for the care of the sick and afflicted of New 
Hanover County. The purpose and effect of the deed is to 
carry out the intent of the charter to create a public charity 
but not a public corporation. The City and County may 
eventually regain the property, but this possibility is distinctly 
within the control of the hospital corporation. Only the latter 
possesses initiative with regard to the same” 164 F. Supp. 
191, 197; and this Court approved that reasoning, and found 
that the hospital was “ free from State control.”



31

The defendants submit that reason lies with Eaton, and 
that a possibility of reverter is far from tantamount to “com­
plete present control” ; but in any event, it is evident that the 
problem does not exist in our present case and that neither 
the Burton case nor the Hampton case is analogous, for the 
Moses Cone Hospital does not lease from the State and the 
State has no possibility of reverter in its property. Instead — 
as Judge Stanley found — “The Cone Hospital owns, and has 
owned since 1911, the fee simple title to the real property on 
which its hospital is located. Its Board of Trustees has the ex­
clusive power and control over all real and personal property 
of the corporation, and all the institutional services and activi­
ties of the hospital” (200a).

The plaintiffs suggest that the right of the United States 
to recover its Hill-Burton contribution if within twenty years 
after the completion of construction the owner of the facility 
shall cease to be “non-profit” (or if the facility shall be trans­
ferred to an unqualified transferee) is similar to a possibility 
of reverter; but this is remoteness compounded. Reversion 
takes effect by operation of law; these provisions merely con­
fer a right which may or may not be enforced. Under a pos­
sibility of reverter, the property itself reverts; the right pro­
vided here is for a monetary recovery, and there is no provi­
sion for the recovery of any interest in the facility itself. It 
seems apparent that this right of recovery is simply another 
condition of the grant of funds, but even a possibility of re­
verter is not tantamount to “complete present control” ; and 
this right of recovery in any event is at least one step further 
removed, for it is clearly not tantamount to a possibility of 
reverter.

This case has been argued differently, of course, but ex­
cept for the “power and prestige” of the Attorney General 
and the voluntary cooperation of the Moses Cone Hospital in 
the nursing educational programs of the two colleges, there is



32

no single point of contact here which is not to be found in 
the Eaton case, (including Federal money); and conversely 
and to put this case well within the Eaton case, there were a 
number of additional contacts in Eaton which are not to be 
found here (e.g., the possibility of reverter, the City and 
County contributions, and the majority of the Board of Man­
agers) . It is submitted that the Eaton case does control our 
present case; that its reasoning is still wholly valid; and that — 
on precedent and on reason — it requires the affirmance of 
the District Court.

(8) In reference to the position of the American Civil Liber­
ties Union

Discrimination by private persons is not itself violative of 
the Fourteenth Amendment. It is therefore difficult to credit 
as a serious one the suggestion that the mere omission of the 
State to make illegal this permissible conduct is violative of 
the same Fourteenth Amendment — that all under the one 
amendment the State commits a crime in failing to make a 
crime of that which is admittedly not a crime.

(9) In reference to the two individual defendants

The plaintiffs did not allege any specific grievances against 
the two individual defendants, or request any specific relief 
against them. It is difficult to see why they were joined in this 
action at all, but it is apparent in any event that they were 
joined in their respective capacities as Director and as Admin­
istrator of the two hospitals; that their involvement is wholly 
derivative; and that they are even more clearly behind the 
shield which protects the two private corporations in this ac­
tion from any offense against constitutional guarantees 
through their purely private actions. If a corporation is a pri­
vate one, and not an instrumentality of government, either 
State or Federal, it follows inevitably that an individual act­
ing for that private corporation—and once removed—cannot



33

be an agent of government, either State or Federal, in so act­
ing; and that the Fourteenth and the Fifth Amendments 
“erect no shield against (his) merely private conduct.” 
Shelley v. Kraemer, 334 U. S. 1, 13 (1948); Watkins v. Oak- 
lawn Jockey Club, 183 F. 2d 440 (8th Cir. 1950).

III. THE CONSTITUTIONALITY OF THE CHALLENGED 
PROVISIONS OF THE HILL-BURTON ACT IS IRRELE­
VANT AND IS NOT BEFORE THE COURT IN THIS 
ACTION.

The plaintiffs asserted in the court below that the so-called 
“ separate but equal exception” of Section 291e (f) of the Hill- 
Burton Act is unconstitutional. The Attorney General of the 
United States intervened in the action, and said that he too 
thought these provisions were unconstitutional. The defend­
ants have always maintained that the constitutionality of 
these provisions is completely and wholly irrelevant in this 
action; and Judge Stanley agreed that the question of con­
stitutionality is not an issue in this case (220a).

It is true, as the plaintiffs note (Plaintiffs’ Brief, p. 40, n. 
53), that the defendants do not rely on the separate but equal 
provisions of the Plill-Burton Act to excuse their conduct — 
not because such an argument is preposterous (even if it is 
preposterous) but simply because it is irrelevant. The defend­
ant hospitals do agree, however, that if they were public cor­
porations in the constitutional sense — or if one prefers, if 
their contacts with government were such that they were sub­
ject to the constitutional amendments — it would be prepos­
terous to suggest that the provisions of the Hill-Burton Act or 
of the Surgeon General’s regulations could possibly excuse un­
constitutional conduct on their part; but this merely empha­
sizes again the entire irrelevance of the question of the con­
stitutionality of the Hill-Burton provisions.

The defendants have pointed out again and again that the



3 4

significant question — and the only significant question — in 
this case is whether these defendant hospitals are govern­
mental instrumentalities or private corporations. If they are 
instrumentalities of government, then they are subject to the 
constitutional amendments and discrimination is unlawful 
under those amendments; and the provisions of the Hill- 
Burton Act can neither authorize nor excuse violations of the 
constitutional amendments. But if these hospitals are private 
corporations, they are not subject to the amendments; the 
Federal courts do not even have jurisdiction to consider the 
matter of discrimination; and the defendant hospitals need no 
charter, no license, and no apology, or if you will, no “ authori­
zation,” no “ sanction,” and no “permission” — whether from 
the provisions of the Hill-Burton Act or from any other 
source — for their purely private conduct. Either way, how­
ever, public or private, the constitutionality or unconstitu­
tionality of the Hill-Burton provisions cannot possibly affect 
the result, and it is therefore quite apparent that the consti­
tutionality of these provisions is not relevant in the present 
action or before this Court for consideration. The defend­
ants cannot concede (since the issue is not involved), but 
would be entirely willing to assume for the purposes of argu­
ment, that the challenged provisions of the Hill-Burton Act 
are unconstitutional. It is an assumption of no moment, for 
the defendant hospitals are private corporations still and their 
conduct is private conduct, and the constitutional amend­
ments “ erect no shield against merely private conduct.”

The Hill-Burton contracts between the Federal govern­
ment and these two private hospitals are executed contracts; 
and the only significance of the separate but equal provisions 
of the Hill-Burton Act in our present case is to establish that 
these private hospitals — in accepting Hill-Burton funds — 
did not agree to any limitations on their lawful private con­
duct in this area, but that on the contrary, they had an express



35

understanding with the Federal government when they ac­
cepted the funds that they would retain their private charac­
ter and their freedom of action in the precise area which is 
under challenge here.

The United States has said (in its brief, at page 41) that 
“ It was the underlying federal statute (the Hill-Burton Act) 
which unquestionably led to the North Carolina program of 
hospital construction and which instigated the discrimina­
tions which this action seeks to enjoin.” This is a sweeping 
and wholly implausible generalization. It does not appear in 
our record, for it did not appear relevant until we began to 
speculate about instigation, but it is a matter of ascertainable 
fact that at the last annual audit report at September 30, 
1962, the Moses Cone Hospital trust fund (which was estab­
lished wholly through private endowment except for the Hill- 
Burton contribution) showed total assets of $14,242,594. 
These assets, at this value, included the hospital land at a 
value of $1.00; buildings and other physical assets at depreci­
ated cost (the accumulated reserve for depreciation of physi­
cal assets of $2,039,327 already greatly exceeded the total 
Federal contribution of $1,269,950 under the Hill-Burton 
A ct); and 492,025 shares of the common stock of Cone Mills 
Corporation at a nominal total value of $3.00 — the current 
market value of the stock is approximately $12,00 per share. 
The Federal government is concededly a larger operation than 
the Moses Cone Hospital trust, but it is nonetheless quite 
obvious that the trust fund was entirely adequate and clearly 
charged with the obligation to build and operate the hospital 
in accordance with the purposes of the trust — regardless of 
aid or “ instigation” from the “ underlying federal statute.” It 
is therefore something less than plausible to suppose — if we 
are to indulge, with the Attorney General, in supposition — 
that the Moses Cone Hospital would have accepted the rela­
tively minor Federal contribution to its construction funds if



3 6

its Trustees had for a moment suspected that in doing so, they 
were surrendering any degree of control over the affairs of the 
hospital to the Federal government, and not simply agreeing 
(as conditions of the grant of Federal funds) to meet the cor­
ridor widths and other construction requirements under the 
Hill-Burton Act which would presumably have been met or 
exceeded in any event in any modern hospital.

The conditions of the grants of Hill-Burton funds were 
clearly defined by the Act and by the regulations of the Sur­
geon General pursuant thereto, and it was explicitly stated 
in the Act itself (Section 291m) that the Federal government 
would not attempt to exercise any supervision or control over 
the operations of the hospitals but that they might pursue 
their lawful private ends in accordance with their own desires 
and social practices; and this explicit understanding would 
certainly appear to constitute a tacit recognition that these 
recipients did not waive their privacy in accepting Hill-Burton 
funds. It should be emphasized that the plaintiffs and the 
Attorney General are not asking this Court simply to declare 
that the Federal government may not constitutionally give 
funds to a segregated private facility. They are asking a great 
deal more than this. They are asking this Court now to de­
segregate all those private facilities to which Federal funds 
have been given — over a period of years — under the Hill- 
Burton Act, even though those funds were given on the con­
dition and with the understanding that those private facilities 
might retain their freedom to conduct their private affairs in 
their own way.

It is important to notice that this action does not even seek 
to bar further Hill-Burton contributions to these two hospitals 
on the conditions provided by the Act; it seeks instead to 
change the conditions of the grants already made. Where a 
public facility receives public funds, we might feel that since 
Government has continuing control of the public facility, it



3 7

is not unreasonable that it should change the conditions of 
the grant just as it might change the operations of the facility. 
But where Government gives funds to a private facility — in 
Senator i aft s words a gift for that particular private hos­
pital” — with an express understanding that the private facil­
ity shall retain its privacy in a particular area, it is difficult to 
accept the suggestion that Government may thereafter invade 
the privacy of that facility, and change its character over its 
protest, in the precise area of understanding. If the Federal 
government may not constitutionally contribute funds to a 
segregated private facility, then it can presumably be stopped 
from making further contributions on those conditions; but 
that would certainly seem to be the way to go. "To emascu­
late ancient rules which have guided the Judiciary through its 
long history solely for the purpose of achieving a particular 
result, is to set the judicial ship afloat in troublesome waters 
without chart, compass or rudder.” Judge Gewin dissenting 
in Hampton v. City of Jacksonville, 304 F. 2d 320 331 
(1962).

CO NCLU SIO N

The defendants have pointed out that this case is con­
trolled, in its every facet, by well-established principles of law, 
and they have cited chapter and verse to document that thesis. 
No one would argue that the law, simply because it is well 
settled, can never be changed, but it might well be argued 
that where the law is well settled, change should be a legisla­
tive rather than a judicial process and application should be 
prospective rather than retroactive. Yet this Court in this 
case is asked to write new law, not in an open or unsettled 
area, but in defiance of established principles unshaken from 
Dartmouth College in 1819 through Khoury in 1962; it is 
asked to write this new law judicially in flat contravention of 
the expressed legislative will of the Congress; and it is asked 
not only to write this new law, but to apply it retroactively to



3 8

alter existing rights widely held under the well-settled prior 
law. The defendants submit that precedent is both clear and 
sound, and that the judgment of the District Court should be 
affirmed.

Respectfully submitted,

H e r b e r t  S. F a l k  

C h a r l e s  E. R o t h

319 Southeastern Building 
Greensboro, North Carolina

Attorneys for the Defendants The Moses 
H. Cone Memorial Hospital and 
Harold Bettis, its Director



Appendix



IND EX TO APPENDIX

Page

Affidavit of William F. Henderson------------------------- laa

Exhibit A to Affidavit---------------------------------------  4aa



(Filed: June 8, 1962)

W ILLIAM  F. HENDERSON, being duly sworn, says:

(1) That he is the Executive Secretary of The North 
Carolina Medical Care Commission, and that he has held 
that position since March, 1958;

(2) That every hospital (as defined in N.C.G.S. 131- 
126.1) in North Carolina is required by law to obtain a license 
to operate from The North Carolina Medical Care Commis­
sion; that the requirements for such licensing are set forth in 
the North Carolina Hospital Licensing Act (Article 13A of 
Chapter 131 of the General Statutes of North Carolina), and 
in the rules and regulations of The North Carolina Medical 
Care Commission established thereunder; and that these re­
quirements for licensing are applied — equally and alike and 
without any distinction whatsoever — to all hospitals in the 
State of North Carolina, public or private, profit or non­
profit, and whether or not such hospitals have received or 
have not received Hill-Burton funds;

(3) That the purpose of the North Carolina Hospital 
Licensing Act as set forth in N.C.G.S. 131-126.2 is “ to pro­
vide for the development, establishment and enforcement of 
basic standards: (1) For the care and treatment of individuals 
in hospitals and (2) For the construction, maintenance and 
operation of such hospitals, which, in the light of existing 
knowledge, will insure safe and adequate treatment of such 
individuals in hospitals” ; that The North Carolina Medical 
Care Commission requires compliance with the standards es­
tablished by it under the Hospital Licensing Act before it will 
license a hospital to operate in North Carolina, but the Rules 
and Regulations for Hospital Licensure in North Carolina 
prescribed by The North Carolina Medical Care Commission

Affidavit of William F. Henderson

laa



under the authority of the Hospital Licensing Act (and par­
ticularly N.C.G.S. 131-126.7) expressly require that “The gov­
erning board” of each hospital “ shall be the supreme author­
ity in the hospital to which the administrator, the medical 
staff, the personnel, and all auxiliary organizations are directly 
or indirectly responsible” ; and that The North Carolina Medi­
cal Care Commission has no authority, and does not attempt, 
to exercise any supervision or control over the administration, 
personnel, maintenance, or operation of any hospital licensed 
by it under the North Carolina Hospital Licensing Act, 
whether such hospital has received or has not received Hill- 
Burton funds;

(4) That he is familiar with The Moses H. Cone Memo­
rial Hospital and the Wesley Long Community Hospital, both 
of which are located in Greensboro, North Carolina; that li­
censes to operate have been issued to both of these hospitals 
by The North Carolina Medical Care Commission under the 
North Carolina Hospital Licensing Act; but that The North 
Carolina Medical Care Commission has no authority, and 
does not attempt, to exercise any supervision or control over 
the administration, personnel, maintenance, or operation of 
either of these hospitals;

(5) That The North Carolina Medical Care Commission 
has recently requested the advice of the Attorney General of 
the State of North Carolina as to its powers and authority; 
that on the 10th day of February, 1962, the Attorney Gen­
eral of the State of North Carolina rendered a written opinion 
to the North Carolina Medical Care Commission stating that 
the said Commission has no power or authority under the laws 
of North Carolina (including the Hospital Licensing Act) to 
interfere with or control in any manner the selection of the 
personnel on the medical staff or any of the operational proce­
dures of a local hospital, or to control anything pertaining to 
the internal operation of a local hospital, and “has no legal

2 a a



authority and cannot impose, as a condition of Federal and 
State assistance, any requirements whatsoever relating to the 
selection of personnel and professional staff” and “ may not 
require guarantees by applicant hospitals that physicians of all 
races will be granted privileges to practice within such local 
hospitals” ; that there is attached hereto as Exhibit A, and 
made a part of this affidavit, a copy of the said opinion dated 
10 February 1962 rendered by the Attorney General of North 
Carolina to The North Carolina Medical Care Commission; 
and that this opinion of the Attorney General has been ac­
cepted by The North Carolina Medical Care Commission as 
a definition of its powers and authority under North Caro­
lina law.

This the 30th day of May, 1962.

W i l l i a m  F. H e n d e r s o n  

Executive Secretary, The North Carolina 
Medical Care Commission

Subscribed and sworn to before me this 30th day of May, 
1962.

Kathryn W. Hughes
Notary Public

My commission expires 7-31-63.

3 a a



STATE OF NORTH CAROLINA 
D e p a r t m e n t  o f  J u s t i c e  

P. O. Box 629 
Raleigh

10 February 1962

Honorable William F. Henderson 
Executive Secretary 
Medical Care Commission 
Box 9594
Raleigh, North Carolina 

Dear Mr. Henderson:

You call my attention to Sec. 635 of Title VI of the Pub­
lic Health Service Act, which is commonly referred to as the 
Hill-Burton Act.

This section, which also appears as 42 USCA 291m, 
states in substance that no Federal officer or employee shall 
have the right to exercise any supervision or control over the 
administration, personnel, maintenance, or operation of any 
hospital, diagnostic or treatment center, rehabilitation facil­
ity, or nursing home with respect to which any funds have 
been or may be expended under this subchapter.

You state that the question has been raised as to whether 
or not the Medical Care Commission may impose, as a con­
dition of Federal and State assistance, requirements relating 
to the selection of personnel and professional staff, and if 
the Commission may require guarantees by the applicant 
hospitals that physicians of all races will be granted privileges 
to practice within such institutions.

Exhibit A  Annexed T o  Affidavit of
William F. Henderson

4 a a



In looking over the so-called Hill-Burton Act, I find that 
there is no conformity requirement, so far as Federal law is 
concerned, which requires the State Administrative Agency, 
in this case the Medical Care Commission, to supervise and 
control the selection of the medical staff or the operation 
and management of a local hospital which has been estab­
lished and built pursuant to grants-in-aid made to the State 
agency for such purpose.

An examination of Article 13 of Chapter 131 of the Gen­
eral Statutes, as amended, shows that there is no power or 
authority granted to the Medical Care Commission whereby 
the Commission may in any manner interfere with or con­
trol the selection of the personnel on the medical staff or any 
of the operational procedures of a local hospital.

The Medical Care Commission of this State is con­
cerned with contributions for indigent patients (G.S. H i­
l l  9 ), the construction and enlargement of local hospitals 
(G. S. 131-120), loan funds for medical and other students 
(G. S. 131-121) and the expansion of the Medical School of 
the University of North Carolina. Outside of the loan funds 
I would say that the primary duties of the Medical Care 
Commission relate to plans for the construction and mainte­
nance of hospitals, medical schools and related facilities. The 
chief function of the Medical Care Commission is to survey 
the hospital needs of a county or area, approve applications 
far funds, promulgate standards and policies for the con­
struction, remodeling or additions made to hospitals. The 
regulatory authority of the Commission relates to these pur­
poses of establishing hospitals; that is, the physical facilities, 
and I find no provision of law that would give the Medical 
Care Commission the right to control the physicians on the 
staff, their method of selection or anything pertaining to the 
internal operation of a local hospital. What I have just said 
is also applicable to the Hospital Licensing Act, which ap­

5aa



pears as Article 13A, Chapter 131 of the General Statutes.

If you will examine Article 12 of Chapter 131 of the 
General Statutes, known as the Hospital Authorities Law, 
and also Article 13B, Chapter 131 of the General Statutes, 
which represents additional authority of subdivisions of gov­
ernment to finance hospital facilities, and, in fact, any of 
the hospital laws, you will find that such hospitals as to their 
internal administration are governed by local boards of trus­
tees, boards of managers or hospital authority, and that the 
Medical Care Commission has nothing to do with or no con­
trol over these administrative boards and bodies.

I advise you, therefore, that the North Carolina Medical 
Care Commission has no legal authority and cannot impose, 
as a condition of Federal and State assistance, any require­
ments whatsoever relating to the selection of personnel and 
professional staff. Furthermore, the Commission may not 
require guarantees by applicant hospitals that physicians of 
all races will be granted privileges to practice within such 
local hospitals. If a physician of any race feels himself ag­
grieved by the action of any such governing authorities, then 
his grievances are matters to be considered by the governing 
authorities of the local hospitals, and they are not proper 
matters to be considered by the Medical Care Commission.

Yours very truly,
T. W. BRUTON 
Attorney General

RALPH MOODY 
Assistant Attorney General

RM:cap

6aa