Kappa Sigma Fraternity, Inc. v. Kappa Sigma Fraternity

PRESENT: All the Justices

KAPPA SIGMA FRATERNITY, INC.
A/K/A KAPPA SIGMA MEMORIAL
FOUNDATION, ET AL.

v. Record No. 022435 OPINION BY JUSTICE BARBARA MILANO KEENAN
October 31, 2003
KAPPA SIGMA FRATERNITY, ET AL.

FROM THE CIRCUIT COURT OF ALBEMARLE COUNTY
Paul M. Peatross, Jr., Judge

In this appeal, the primary issue is whether a statute of

limitations defense is applicable to bar a claim that certain

amendments to a nonstock corporation's articles of incorporation

are invalid.

Kappa Sigma Fraternity (the Fraternity) is an

unincorporated membership association that was founded in 1869

at the University of Virginia. At the time this case was heard

in the circuit court, the Fraternity had over 158,000 alumni and

about 215 undergraduate chapters located at colleges and

universities in the United States and Canada. The Fraternity is

governed by a five-member "Supreme Executive Committee"

(Fraternity Committee) and meets on a biennial basis at "Grand

Conclaves" held every odd-numbered year.

In 1965, the Fraternity acquired a contract right to

purchase certain real property in Albemarle County. The

Fraternity planned to use the property, which was about 17 acres

in size and contained various improvements, as the Fraternity's
permanent headquarters and as a "perpetual memorial" to the

Fraternity.

In 1966, the Fraternity formed a nonstock corporation,

Kappa Sigma Fraternity, Inc., a/k/a Kappa Sigma Memorial

Foundation (the Foundation), to hold legal title to the

property. The Fraternity assigned its contract to purchase the

property to the Foundation, and the Foundation acquired legal

title to the property.

At the time of purchase, the property contained a "main

house" and a "carriage house." The Fraternity used these

facilities to house its administrative offices and a museum

dedicated to the history of the Fraternity.

The Foundation's original articles of incorporation stated

that the purpose of the Foundation was "to operate an

international fraternity and to promote friendship and brotherly

feeling among its members." The articles also defined the

membership classes of the Foundation:

(1) ACTIVE CHAPTERS shall be those chartered by the
Board of Directors of the corporation and shall be
composed of four or more male persons who are students
at some one college or university.

(2) ALUMNI CHAPTERS shall be those chartered by the
Board of Directors of the corporation and shall be
composed of ten or more alumni of the fraternity
residing in or near the same locality.

(3) ALUMNI MEMBERS shall be those alumni of the
fraternity who are not affiliated with an alumni
chapter.

2
 The articles accorded each of these membership classes

voting rights and provided that each alumni member present at

the biennial meeting was entitled to cast one vote. The

articles also provided for a five-member Board of Directors (the

Board) "elected by the vote of the members of the corporation at

the [biennial] meeting of the corporation to be held every odd

numbered calendar year."

The Foundation's biennial meeting was intended to coincide

with the Fraternity's biennial "Grand Conclave." The five-

member Fraternity Committee served as the Foundation's original

Board. However, after 1967, the members of the Fraternity

Committee, which were elected by the Fraternity every two years,

and the membership of the Foundation's Board began to diverge.

In 1967, the Board approved certain amendments to the

Foundation's articles of incorporation (the 1967 amendments).

These amendments attempted to transform the Board of Directors

into a Board of Trustees and provided that the purpose of the

Foundation was "to hold property, both real and personal, for

the benefit of the Kappa Sigma Fraternity." The 1967 amendments

further provided that the "Trustees shall serve for life." The

1967 amendments were not ratified by the members of the

Foundation.

3
 In 1974, the Board again voted to amend the Foundation's

articles of incorporation (the 1974 amendments) to qualify the

corporation as a charitable organization exempt from federal

income taxes under Section 501(c)(3) of the Internal Revenue

Code. The 1974 amendments restated the purpose of the

corporation as follows:

The Corporation is organized for educational and
charitable purposes. It shall have the power to hold
title to property, both real and personal. It shall
have the power to solicit funds, to grant
scholarships, to conduct leadership training schools
and to cooperate with educational, medical and other
charitable institutions.

The 1974 amendments provided that the "[c]orporation shall

have no members," but these amendments were approved only by the

Board. The members never ratified the 1974 amendments.

In the mid-1970s, the Foundation built a "training center"

on the property to serve as a conference center. The training

center contained a large meeting room and dormitory space to

house visiting members of the Fraternity and other guests. The

Foundation sponsored leadership conferences at the training

center for the Fraternity's undergraduate chapters. The

training center also was made available for the use of other

charitable and educational institutions.

There were various "lease arrangements" between the

Fraternity and the Foundation. In one such arrangement, the

Fraternity entered into a "triple net lease obligation" with the

4
Foundation to lease space on the premises for the Fraternity's

headquarters. In exchange for its use of the property, the

Fraternity paid all the property's maintenance costs, expenses,

taxes, and insurance. In addition, the Fraternity provided all

the Foundation's administrative services and supervised the

training facility for the Foundation.

In recent years, various disputes arose between the

Fraternity and the Foundation concerning the lease arrangement,

the solicitation of funds for the Foundation, and the

Foundation's use of its charitable assets. In 1999, the

Foundation decided to sell the real property for certain stated

reasons, including to optimize use of the Foundation's assets

and to comply with the Foundation's charitable purpose.

In a letter transmitted in November 1999, the Foundation

informed the Fraternity of the Foundation's decision to sell its

real property. In April 2001, the Foundation notified the

Fraternity that the property had been listed for sale. The

Foundation sought a price of $6,500,000 for the property.

The property, which is the Foundation's primary asset, had

an appraised value of $4,500,000 at the time it was listed for

sale. The Foundation also holds cash and investments which

primarily have been donated by members and alumni of the

Fraternity.

5
 The Fraternity and three alumni, Thomas P. Bishop, Kevin S.

Kaplan, and E.L. Betz, Jr. (the individual petitioners), filed a

"Second Amended Bill of Complaint for Declaratory Judgment,

Injunctive Relief, and Petition" against the Foundation and the

individual members of its board of trustees (collectively, the

Foundation). The Fraternity and the individual petitioners

(collectively, the Fraternity) asked the chancellor, among other

things, to declare that legal title to the property was held in

an express trust by the Foundation for the benefit of the

Fraternity, and to place the Foundation's funds in a

constructive trust "for the furtherance of the charitable and

educational goals of the Fraternity."

The Fraternity also asked the chancellor to declare that

the original 1966 articles of incorporation "remain in full

force and effect and that all subsequent amendments or

restatements of the Articles of Incorporation are null and void"

because those amendments and restatements were not ratified by

the Foundation's members. The Fraternity asked the chancellor

to order a meeting of the Foundation's members pursuant to Code

§ 13.1-840 for the purpose of electing new directors to the

Foundation's board. In response, the Foundation raised various

affirmative defenses, including that certain statutes of

limitation barred the Fraternity's suit.

6
 In briefs submitted to the chancellor, the Fraternity

argued that its bill of complaint was not barred by any statute

of limitations because "[t]he Fraternity responded promptly when

its property rights . . . were threatened by sale and it

discovered, (through due diligence that it previously had no

reason to undertake), that its members had voting rights in [the

Foundation]." The Fraternity asserted that the Foundation "did

not breach its trust until November 8, 1999, at the earliest,"

when the Foundation announced its intention to sell the

property. The Fraternity also contended that the 1967 and 1974

amendments were void, rather than "merely voidable," because

they were not ratified by the Foundation's members.

Former Code § 13.1-236, in effect when the Board approved

the 1967 and 1974 amendments, provided in relevant part:

Amendments to the articles of incorporation shall be
made in the following manner:

(a) Where there are members having voting rights, the
board of directors shall adopt a resolution setting
forth the proposed amendment, finding that it is in
the best interests of the corporation and directing
that it be submitted to a vote at a meeting of members
having voting rights, which may be either an annual or
a special meeting. Notice shall be given to each
member entitled to vote at such meeting within the
time and in the manner provided in this Act for the
giving of notice of such meetings of members. The
proposed amendment shall be adopted upon receiving
more than two thirds of the votes entitled to be cast
by members present or represented by proxy at such
meeting.

7
 The chancellor heard the evidence ore tenus. In a letter

opinion, the chancellor concluded that under the articles of

incorporation, the first two classes of membership, the "Active

Chapters" and the "Alumni Chapters," did not exist because they

had not been "chartered" by the Board. However, the chancellor

determined that the third class of membership, "Alumni Members,"

did exist because that class required no other action by the

Board to take effect. The chancellor thus concluded that the

Foundation was a "membership corporation whose members consisted

of individual alumni members not affiliated with any chartered

alumni chapter," and found that the individual petitioners

belonged to this third class.

The chancellor determined that the 1967 and 1974 amendments

were invalid because after they were approved by the Board, they

were not submitted to a vote by the Foundation's members. The

chancellor concluded that the Foundation held the property in an

express trust for the benefit of the Fraternity, and imposed a

constructive trust on the Foundation's assets for the

Fraternity's benefit. The chancellor further determined that

the statute of limitations and other affirmative defenses raised

by the Foundation did not bar the Fraternity's claims.

In July 2002, after the chancellor issued his letter

opinion, Code § 2.2-507.1 became effective. That statute

provides:

8
 The assets of a charitable corporation
incorporated in or doing any business in Virginia
shall be deemed to be held in trust for the public for
such purposes as are established by the donor's intent
as expressed in governing documents or by other
applicable law. The Attorney General shall have the
same authority to act on behalf of the public with
respect to such assets as he has with respect to
assets held by unincorporated charitable trusts and
other charitable entities, including the authority to
seek such judicial relief as may be necessary to
protect the public interest in such assets.

Thereafter, the Foundation argued that based on Code § 2.2-

507.1, the chancellor lacked jurisdiction to proceed further in

the case because the Attorney General had not been joined as a

necessary party.

On July 22, 2002, the chancellor entered a final order

incorporating his letter opinion and restating his ruling that

the 1967 and 1974 amendments were "invalid and of no force and

effect." In the order, the chancellor also enjoined the

trustees "from taking any actions with respect to the business

and operations" of the Foundation.

In addition, the chancellor vacated the positions of all

existing directors and officers of the Foundation. The

chancellor referred the case to a commissioner in chancery to

conduct a meeting of the Foundation's membership pursuant to

Code § 13.1-840 for the purpose of electing new Board members.

The chancellor ordered the commissioner "to supervise the

business and operations" of the Foundation until the election of

9
the new Board. The chancellor also rejected the Foundation's

argument that the Attorney General was a necessary party

pursuant to Code § 2.2-507.1. The Foundation appeals. 1

Initially, the Foundation contests the chancellor's

jurisdiction to enter the final decree of July 22, 2002,

asserting that once Code § 2.2-507.1 became effective on July 1,

2002, the Attorney General became a necessary party to the suit.

We disagree with the Foundation's contention because the statute

did not exist when this suit was filed. In reaching this

conclusion, we express no opinion whether the Attorney General

is a necessary party in suits of this nature filed after July 1,

2002.

Addressing the merits of the appeal, the Foundation

concedes that it did not comply with all requirements in

amending its articles of incorporation in 1974. The Foundation

argues that, nevertheless, the Fraternity's challenge to the

amendments was barred by the statute of limitations because the

Board's action approving the amendments was merely voidable,

1
On August 31, 2002, a meeting was held pursuant to the
chancellor's ruling at which 186 alumni members were present and
elected a new board of directors. However, the chancellor
invalidated this election because of the lack of a necessary
quorum of about 15,800 members, which number represents ten
percent of the over 158,000 alumni members of the Foundation's
third voting class. The Fraternity has since filed a petition
to dissolve the Foundation, which is presently pending.

10
rather than void. 2 Thus, the Foundation contends that the

statute of limitations for challenging the Board's action began

to run in 1974, when the amendments were adopted without

approval by the Foundation's members, and that the limitation

periods applicable to the Fraternity's claims were, at most,

five years. The Foundation therefore maintains that any claims

by the Fraternity expired in 1979, and that the 1974 amendments

remain in full force and effect because they were not timely

challenged by the Fraternity.

In response, the Fraternity argues that its challenge to

the 1974 amendments is not barred by the statute of limitations.

The Fraternity asserts that under this Court's ruling in

Princess Anne Hills Civic League, Inc. v. Susan Constant Real

Estate Trust, 243 Va. 53, 413 S.E.2d 599 (1992), a voidable

corporate act becomes null and void unless it is properly

ratified. Thus, the Fraternity contends that the 1974

amendments are null and void because they were never ratified by

a vote of the Foundation's members. We disagree with the

Fraternity's arguments.

We first note that the form of the present litigation,

which is a declaratory judgment suit, does not affect our

analysis of the statute of limitations. The applicability of

2
Based on our holdings below, we address only the adoption
of the 1974 amendments and need not consider the adoption of the

11
the statute of limitations is governed by the object of the

litigation and the substance of the complaint, not the form in

which the litigation is filed. See Board of Supervisors v.

Thompson Assocs., 240 Va. 133, 139, 393 S.E.2d 201, 204 (1990);

Friedman v. Peoples Serv. Drug Stores, Inc., 208 Va. 700, 703,

160 S.E.2d 563, 565 (1968); see also Johnson v. Davis, 582 F.2d

1316, 1318 (4th Cir. 1978). "If the law were otherwise, the

statute of limitations could be rendered meaningless merely by

the filing of a declaratory judgment action." Thompson Assocs.,

240 Va. at 139, 393 S.E.2d at 204. Therefore, we will not

permit a complainant to use the declaratory judgment statute as

a vehicle to circumvent the statute of limitations applicable to

the substance of a complaint. See id. at 139, 393 S.E.2d at

204-05.

Next, we observe that the Fraternity's reliance on our

holding in Princess Anne Hills Civic League is misplaced.

There, the statute of limitations was not asserted as a defense

to the challenged corporate act. We were asked to decide

whether a deed purportedly executed by a nonstock corporation

was void because it had been executed by the corporation's

president without the required approval of the board of

directors and the vote of the corporation's members. 243 Va. at

55-57, 413 S.E.2d at 601-02. We held that because execution of

1967 amendments.

12
the deed was within the powers conferred upon the corporation by

the General Assembly, but the corporation failed to do properly

that which it had the power to do, the corporate action

executing the deed was voidable, rather than void. Id. at 61,

413 S.E.2d at 604. In the absence of a statute of limitations

defense, we further held that the corporate act was subject to

challenge and that the deed was null and void because the

corporation had not complied with all statutory requirements.

Id. at 62, 413 S.E.2d at 604.

Here, because the Foundation has asserted a defense of the

statute of limitations, we must determine whether that defense

bars consideration of the Fraternity's challenge to the

Foundation's corporate action adopting the 1974 amendments. We

begin by reviewing the relevant powers of a nonstock

corporation.

Under Code § 13.1-884(A), a nonstock corporation is

empowered to "amend its articles of incorporation at any time to

add or change a provision that is required or permitted in the

articles." A similar provision appeared in former Code § 13.1-

235, which was in effect in 1974 when the Board adopted the

challenged amendments. Under that section, a corporation was

authorized to "amend its articles of incorporation . . . in any

and as many respects as may be desired, so long as its articles

13
of incorporation as amended contain only such provisions as are

lawful under this Act." Id.

The 1974 amendments to the Foundation's articles of

incorporation reflected changes in the Foundation's statement of

purpose and the provisions regarding its membership. Because

these provisions plainly were permitted subjects for amendment

under former Code § 13.1-235, the Foundation had the power to

make such changes to its articles.

The Foundation did not comply with the statutory

requirements necessary for approval of the 1974 amendments.

Under former Code § 13.1-236(a), amendment of the Foundation's

articles of incorporation required approval of more than two-

thirds of all votes entitled to be cast by the members present

at an annual or special meeting held in conformance with the

other statutory requirements. However, because adoption of the

1974 amendments was within the Foundation's power conferred by

statute, the Board's approval of those amendments was a

voidable, rather than a void, act of the corporation. See

Princess Anne Hills Civic League, 243 Va. at 61; 413 S.E.2d at

604; Winston v. Gordon, 115 Va. 899, 905-06, 80 S.E. 756, 759

(1914); see also Michelson v. Duncan, 407 A.2d 211, 218-19 (Del.

1979).

We hold that a challenge to a voidable corporate act is

subject to a defense of the statute of limitations. A contrary

14
conclusion is untenable because it would require us to assume,

in the absence of any authority, that the General Assembly

intended to render innumerable corporate transactions,

imperfectly executed but within a corporation's power to act,

subject to attack in perpetuity. In addition, such a conclusion

would blur the bright line presently existing between an ultra

vires act, in which a corporation lacks power to act, and a

voidable act, which is within the lawful scope of a

corporation's power. See Code § 13.1-828; see also Norton

Grocery Co. v. Peoples Nat'l Bank of Abingdon, 151 Va. 195, 202-

03, 144 S.E. 501, 502-03 (1928). Thus, we conclude that the

Fraternity's challenge is subject to the statute of limitations,

and we will consider the substance of the claim asserted to

determine whether it is time-barred. See Thompson Assocs., 240

Va. at 139, 393 S.E.2d at 204; Friedman, 208 Va. at 703, 160

S.E.2d at 565; see also Johnson, 582 F.2d at 1318.

If we consider the Fraternity's claim challenging the 1974

amendments as alleging breach of a contract between the

Fraternity and the Foundation, or breach of a contract between

the Foundation and the individual petitioners, either claim is

barred by the five-year limitation period of former Code § 8-13,

because the alleged injury occurred in 1974 and the present suit

15
was filed in 2001. 3 "It is a well-established principle

uniformly acted upon by courts of equity, that in respect to the

statute of limitations equity follows the law; and if a legal

demand be asserted in equity which at law is barred by statute,

it is equally barred in equity." Belcher v. Kirkwood, 238 Va.

430, 433, 383 S.E.2d 729, 731 (1989)(quoting Sanford v. Sims,

192 Va. 644, 649, 66 S.E.2d 495, 498 (1951)).

Alternatively, if we view the Fraternity's challenge to the

1974 amendments as alleging that the Foundation's directors

breached a fiduciary duty owed to Kappa Sigma Fraternity and to

the individual petitioners as corporate members, both those

claims likewise are time-barred by the five-year "catch-all"

provision of former Code § 8-24. 4 See Singer v. Dungan, 45 F.3d

823, 827 (4th Cir. 1995); Federal Deposit Ins. Corp. v. Cocke, 7

F.3d 396, 401-02 (4th Cir. 1993). Accordingly, we hold that the

Fraternity's claims attacking the validity of the 1974

amendments are barred by the statute of limitations, and that

the chancellor erred in reaching a contrary conclusion. 5

3
We do not express an opinion concerning the legal
sufficiency of such a contract claim.
4
We express no opinion regarding the legal sufficiency of
such a claim of breach of fiduciary duty. We also observe that
the present version of the "catch-all" provision found in Code
§ 8.01-248 fixes a two-year statute of limitations.
5
We disagree with the Foundation's suggestion that the
claim of the individual petitioners also could be viewed as
alleging injury to a property right, based on the denial of the
petitioners' right to vote set forth in the Foundation's

16
 We next consider the Foundation's argument that the

Fraternity's assertion of an express trust, and its accompanying

request that a constructive trust be imposed on the Foundation's

funds, also are time-barred. The Foundation contends that the

limitation period for a claim involving an express trust is five

years, whether the claim is based on an injury to property or on

the breach of a written contract. The Foundation thus argues

that the limitation period on the express trust claim began to

run in 1974 because the 1974 amendments were an open and express

repudiation of the alleged trust. The Foundation further

contends that the Fraternity's request that a constructive trust

be imposed on the Foundation's funds likewise is barred by the

five-year statute of limitations, because any claim to the

Foundation's funds accrued when the Foundation transferred its

assets to a charitable corporation exempt from federal taxation

for the benefit of the public.

In response, the Fraternity argues that it timely asserted

its claim of an express trust and request for a constructive

trust. The Fraternity asserts that it was the beneficial owner

of the property before and after the 1974 amendments went into

effect and that those amendments, which merely changed the

Foundation's tax status, did not constitute a repudiation of the

articles of incorporation. Members of a nonstock corporation do
not have vested property rights based on any provision in the

17
express trust. The Fraternity contends that the Foundation's

"fraud" in attempting to enact the 1974 amendments precludes the

Foundation from asserting the statute of limitations as a

defense. The Fraternity further contends that its request for a

constructive trust was not time-barred because the Foundation's

failure to use the donated funds for their intended purpose

represented a continuing violation of the Foundation's

obligation to its donors. We disagree with the Fraternity's

arguments.

The 1974 amendments, which remain in full force and effect,

committed the Foundation's assets for the benefit of the public.

J. Robert Mahoney, who then was Secretary-Treasurer of the

Foundation and Executive Director of the Fraternity,

acknowledged the effect of this change in the Foundation's

status and purpose in a written statement he made in 1974 to the

Director of the United States Internal Revenue Service. Mahoney

stated that the new charitable foundation "will not serve any

private benefit of or for Kappa Sigma Fraternity. . . . All

alumni contributions to [the Foundation] will be used only for

public charitable purposes and not for the private use of Kappa

Sigma Fraternity."

We hold that this declaration of fundamental change in the

Foundation's status and purpose constituted a repudiation of any

corporation's articles. Code § 13.1-884(B).

18
express trust maintained by the Foundation for the benefit of

the Fraternity. The statute of limitations begins to run on a

claim of express trust when the trustee denies or repudiates the

trust and the trust beneficiary has actual or constructive

notice of this denial or repudiation. Russell v. Passmore, 127

Va. 475, 511, 103 S.E. 652, 664 (1920); see Wiglesworth v.

Taylor, 239 Va. 603, 608, 391 S.E.2d 299, 303 (1990); Broaddus

v. Gresham, 181 Va. 725, 734, 26 S.E.2d 33, 36 (1943). Because

such action by the trustee is an abandonment of the existing

fiduciary character of the trustee's relationship to the trust

property, the statute begins to run based on the trustee's

action and notice, unless the trustee has committed a fraud with

regard to the giving of notice. Russell, 127 Va. at 511; 103

S.E. at 664.

In the present case, the chancellor did not find that the

Foundation was guilty of any fraudulent conduct regarding notice

to the Fraternity of the Foundation's change in purpose and

repudiation of its former status holding property for the

benefit of the Fraternity. As Mahoney's statement indicates,

the Fraternity had notice of the proposed change in the

Foundation's status and the Foundation's effective repudiation

of any alleged trust relationship for the benefit of the

Fraternity. Therefore, any claim of express trust against the

Foundation began to run in 1974, when the repudiation occurred.

19
Accordingly, whether the express trust claim brought by the

Fraternity is construed as being based on breach of contract, on

injury to property, or on breach of fiduciary duty, the

Fraternity's claim was time-barred when this suit was filed in

2001. See former Code §§ 8-13 and -24. 6

We also hold that the chancellor erred in imposing a

constructive trust on the Foundation's assets. Because the

Fraternity's challenge to the 1974 amendments and its claim of

an express trust were time-barred, the 1974 amendments remain in

full force and effect and the chancellor lacked any basis for

imposing a constructive trust on these assets. 7

The Foundation next argues that the chancellor did not have

authority to vacate the positions of its directors and corporate

officers. The Foundation also asserts that the chancellor erred

in appointing a commissioner in chancery to manage the

Foundation's assets and operations because Code § 13.1-910,

which sets forth a court's authority to place a corporation in

receivership, applies only in a proceeding to dissolve the

corporation.

6
The present versions of these statutes are found in Code
§§ 8.01-243, -246, and –248.
7
Because the Fraternity's challenges to the 1974 amendments
are time-barred, its challenges to the 1967 amendments, which
are substantively the same as the challenges to the later
amendments, necessarily are time-barred as well.

20
 In response, the Fraternity asserts that the chancellor's

actions were proper under Code § 13.1-840(B), which authorizes a

court to enter "orders necessary to accomplish the purpose or

purposes of the [court-ordered] meeting." According to the

Fraternity, this provision empowered the chancellor to vacate

the positions of the Foundation's officers and directors and to

appoint a commissioner in chancery to conduct the meeting and to

supervise the Foundation's affairs. We disagree with the

Fraternity's arguments.

The language of Code § 13.1-840 specifies the authority of

a circuit court to order an annual or special meeting of a

nonstock corporation. This authority includes calling the

meeting, fixing its time and place, prescribing the form and

content of the meeting notice, and specifying a record date for

determining which members are entitled to notice of the meeting

and to vote. Id. Because the additional statutory language,

authorizing the court to "enter other orders necessary to

accomplish the purpose or purposes of the meeting," is general

in its terms, we consider that language pursuant to the doctrine

of ejusdem generis.

Under this doctrine, when items with a specific meaning are

listed together in a statute, and are followed by words of

general import, the general words will not be construed to

include matters within their broadest scope but only those

21
matters of the same import as that of the specific items listed.

Turner v. Reed, 258 Va. 406, 410, 518 S.E.2d 832, 834 (1999);

Wood v. Henry County Pub. Schs., 255 Va. 85, 94, 495 S.E.2d 255,

260 (1998). Therefore, we hold that the general language quoted

above refers to matters of procedure related to organizing and

conducting a court-ordered meeting and did not empower the

chancellor to assume the role of the corporate members and take

action removing the Foundation's officers and directors from

their official positions.

We further observe that under Code § 13.1-857(E), a

director continues to serve "until his successor is elected and

qualifies or until there is a decrease in the number of

directors." Because neither of these events had occurred when

the chancellor entered the challenged order, his decision

vacating the terms of the Board members was erroneous for this

additional reason.

We also conclude that the chancellor erred in appointing a

commissioner in chancery to take control of the Foundation's

operations and assets. Under Code § 13.1-910(A), a court's

authority to appoint a receiver to conduct the business of a

corporation is limited to a "judicial proceeding brought to

dissolve a corporation." See Commonwealth v. JOCO Found., 263

Va. 151, 162, 558 S.E.2d 280, 285 (2002). Because the

Fraternity did not seek a dissolution of the Foundation in these

22
proceedings, the appointment of a commissioner to serve the

function of a receiver, as well as the commissioner's actions

pursuant to that appointment, must be vacated. 8 See id.

For these reasons, we will reverse the circuit court's

judgment, vacate the court's appointment of a commissioner in

chancery to serve the function of a receiver and the

commissioner's actions taken pursuant to that appointment, and

enter final judgment in favor of the Foundation.

Reversed,
vacated in part,
and final judgment.

8
Based on our several holdings in this case, we need not
address the Foundation's arguments relating to estoppel and
waiver.

23