Judge rejects bankrupt hospital arguments
PITTSBURGH – Attorneys for both Brownsville General Hospital Inc. and the nonprofit Brownsville Property Corporation entered Federal Bankruptcy Court Wednesday confident of victory; one emerged surprised by the outcome. Federal Bankruptcy Judge M. Bruce McCullough dismissed a case that had been filed by the now-bankrupt hospital seeking payment from the nonprofit group for improvements made to the hospital building since March 2005.
Attorney Lawrence Bolla, representing BGH Inc., had alleged that the nonprofit group was unjustly enriched by the improvements. Attorney John Vetica, representing the property group, argued that under the terms of the lease, BGH Inc. would have been credited for the improvements if it had exercised its option to purchase the building after running the hospital for three years, but the hospital broke that lease when it closed.
“The debtor itself breached the agreement…by closing the doors of the hospital,” Vetica argued.
“We are not suing on the lease. This lease was terminated earlier this summer. We put over $500,000 in cash improvements into the building. They have not denied that they got the benefit of the $500,000 in improvements. They have benefited to our detriment,” Bolla said.
“Pursuant to the lease,” McCullough interjected. “The lease covered it and it says you don’t get it back. You can’t make a lease disappear. Just because it was terminated in bankruptcy court doesn’t mean it didn’t exist. They did it with the full understanding of what they had agreed to.”
McCullough dismissed the claim seeking repayment of more than $590,000.
“We’re elated. This gives us a chance to start. We didn’t think we’d lose that one. They were only entitled to be reimbursed if they purchased the building, and they broke the lease, so they aren’t entitled to anything,” said Frank Ricco, chairman of the nonprofit Brownsville Property Corp. “I’m glad we won something.”
The nonprofit board is in the process of attempting to attract various medical practices to the former hospital to return at least some medical services to the area. Laboratory services resumed on the former hospital campus this summer.
“The lab is doing great. I haven’t heard any complaints and people are pleased it’s back on the campus,” Ricco said.
The nonprofit board has been discussing the possibility of opening an urgent care center at the former hospital, as well as a psychiatric unit and a long-term care facility, none of which requires a hospital license to operate.
Meanwhile Wednesday Bolla filed a new suit against the Brownsville Property Corp. and its affiliate nonprofit firms West Point Health Corp. and Brownsville Health Services Corp. the groups that own the office buildings on the hospital campus and related sites. One part of the suit addressed the improvements and is now moot, Bolla said. The other portions of the suit deal with property taxes owed on the buildings and a past loan.
The suit contends that BGH’s unpaid 2005 and 2006 tax liability and lease rejection penalties should be $200,000, not $831,197 as alleged by the landlord, Brownsville Property Corp. the suit also contends that West Point Health borrowed more than $1.2 million from the hospital in 1997, but stopped making payments on the loan in October 2004. BGH Inc., which purchased the assets, debts and accounts receivable of the former nonprofit community owned hospital in March 2005 in an effort to keep the hospital running, is now asking that the loan be repaid in full.
In addition, the suit is seeking more than $554,000 from Brownsville Health Services for a loan made by the former community-owned hospital in 1997, similar to the West Point situation.