PRESENT: Carrico, C.J., Lacy, Keenan, Koontz, Kinser, and
Lemons, JJ., and Compton, S.J.
COMMONWEALTH OF VIRGINIA, EX REL.
THE HONORABLE RANDOLPH A. BEALES,
ATTORNEY GENERAL, ET AL. OPINION BY
SENIOR JUSTICE A. CHRISTIAN COMPTON
v. Record No. 011794 January 11, 2002
THE JOCO FOUNDATION, ET AL.
FROM THE CIRCUIT COURT OF BEDFORD COUNTY
James W. Updike, Jr., Judge
The question presented in this appeal is whether the
circuit court has subject matter jurisdiction over this suit
instituted by the Attorney General of Virginia, in the name of
the Commonwealth. The suit involves a Virginia corporation duly
established by the State Corporation Commission under the
Virginia Nonstock Corporation Act, Code §§ 13.1-801 through -944
(the Act). The crux of the question is whether the State
Corporation Commission is the proper forum for decision of the
matters raised in the suit, or whether the Attorney General may
proceed in the circuit court under some "inherent power" of the
circuit court or under the common law to obtain the relief
requested.
This proceeding is one of a series of lawsuits stemming
from the 1996 death of Reid Jones, Jr., a philanthropist of
Moneta, Virginia.
In January 2001, the Attorney General filed this suit in a
pleading labeled "Bill of Complaint for Reformation and Removal
of Directors." Among the defendants are The JOCO Foundation,
Dianne E. H. Wilcox, Judy Jarrells, William John Killinger,
SunTrust Bank, SunTrust Securities, Inc., and the Phoenix
Foundation, Inc.
In the bill, the Attorney General asserts that he sues "in
his official capacity . . . as legal representative of the
charitable beneficiaries of the JOCO Foundation, Inc., a
charitable foundation established under the will of Reid Jones."
He asserts that "under the common law and by statute," he "is
the legal representative of the beneficiaries of all charitable
trusts and charitable assets in the Commonwealth." According to
the pleading, the "Attorney General possesses the common law
authority to act on behalf of the public in matters involving
charitable assets."
Further, the Attorney General asserts that The JOCO
Foundation "is a Virginia corporation organized under
§ 501(c)(3) of the Internal Revenue Code to benefit community
organizations and created under" the Jones will. He alleges
that defendants Wilcox, Killinger, and Jarrells are JOCO's
corporate directors, residing in Bedford County.
The bill of complaint states that the SunTrust defendants
are named parties "because they currently hold the assets" of
2
JOCO. The Attorney General alleges that, "on behalf of the
intended beneficiaries" of JOCO, "he asserts this claim to the
assets of the Foundation held by SunTrust to ensure that those
assets are distributed as Reid Jones, Jr., intended when he
created JOCO Foundation."
Additionally, the Attorney General alleges that "The
Phoenix Foundation Inc., is a non-stock corporation created by
Wilcox as a charitable foundation under her control and funded
by money transferred from the JOCO Foundation. [Defendants]
Wilcox, Killinger and Jarrells are all directors of the Phoenix
Foundation, Inc. The Phoenix Foundation is an offshoot or
'alter ego' of the JOCO Foundation."
Also, the Attorney General asserts that he is "informed and
believe[s]" that the individual defendants "have breached their
fiduciary duties owed to the JOCO Foundation by acts of self-
dealing, by engaging in actions which create conflicts of
interest, by accepting and/or paying excessive fees for services
rendered, and by taking actions and using assets of the JOCO
Foundation for non-charitable purposes and/or purposes that
conflict with the stated intentions of the testator, Reid Jones,
Jr., all to the detriment of the intended beneficiaries of the
JOCO Foundation."
Additionally, the Attorney General alleges that "the
actions and/or inaction" of the individual defendants "have
3
caused the assets of the JOCO Foundation to be jeopardized and
threaten to frustrate the stated intent" of Jones.
The Attorney General further alleges that the "original
Articles of Incorporation of the JOCO Foundation reflect . . .
Jones' express intention to use Foundation proceeds to benefit
existing charities in the United States and particularly
charities in the Roanoke, Virginia community." Instead,
according to the allegations, the individual defendants have
removed JOCO's assets from the United States to the Dominican
Republic, either directly or by channeling the assets through
the Phoenix Foundation, Inc.
Also, the Attorney General alleges that the individual
defendants have authorized unnecessary or excessive expenditures
of JOCO assets both in the United States and in the Dominican
Republic, and that they will continue to remove assets "to be
used, among other things for construction of a school in the
Dominican Republic."
Continuing, the Attorney General lists certain conduct of
the individual defendants under the heading "Breaches of
Fiduciary Duties and Acts of Self Dealing." Included in the
list are: Appointing JOCO directors "who are closely related to
or are indebted to Wilcox or subject to her control;" employing
Killinger and his company to perform construction work for JOCO,
and using JOCO assets to pay Killinger fees and costs in excess
4
of the market rate for services or materials provided; "hiring
family members or friends to perform unnecessary services" for
JOCO, and paying those persons with JOCO funds; creating in 1999
the Phoenix Foundation for the purpose of using JOCO assets "to
travel to and spend time at a resort in the Dominican Republic
and to build a school" there, thus contravening Jones' intent in
establishing JOCO to benefit existing charities in the United
States and in the Roanoke area; and, amending the JOCO articles
of incorporation "to delete the geographic limitation . . . and
give the Board of Directors nearly unlimited discretion in
distributing the funds of the JOCO Foundation."
In the prayer for relief, the Attorney General specifically
seeks: Removal of the individual defendants as JOCO directors
and replacement with "new, independent directors;" rescission or
reformation of the JOCO articles of incorporation; appointment
of a receiver to conduct audits of JOCO's and Phoenix's
financial records; an injunction against SunTrust from releasing
or distributing corporate funds; an injunction against the
individual defendants prohibiting distribution of Phoenix funds;
and, an order requiring Phoenix "to return all funds transferred
to it or 'donated' to it by the JOCO Foundation."
In the prayer, the Attorney General also asks the court to
"order such terms and conditions as it deems appropriate to
5
protect the public's interest in the charitable assets of the
JOCO Foundation."
In "Answer[s] and Grounds of Defense," the individual
defendants, JOCO, and Phoenix generally deny "that the relief
requested in the Complaint is justified under the facts of this
case."
In an answer, the SunTrust defendants admit holding "the
assets of The JOCO Foundation, Inc.," and state that the court's
permission to interplead the assets has been sought in a
separate proceeding. SunTrust asks that it be dismissed from
this suit and that the court grant its request for interpleader,
"which will satisfy the Plaintiffs' goal of preventing SunTrust
from releasing or distributing the funds of The JOCO Foundation
(except as authorized by further decree or order of this
Court)."
The Attorney General then filed a motion "for entry of a
preliminary injunction to be entered against defendants Wilcox,
Jarrells and Killinger enjoining them from taking any action
with respect to the funds and assets of The JOCO Foundation,
Inc., or the Phoenix Foundation, Inc., until the claims in this
case are resolved, and for a further Order appointing a Special
Receiver to manage and operate The JOCO Foundation, Inc. and the
Phoenix Foundation, Inc., while this litigation is pending."
With a memorandum supporting the motion, the Attorney General
6
filed 14 pages of exhibits. In response, defendant Wilcox filed
an extensive memorandum, with 33 exhibits.
During an April 2001 hearing on the motion, at which no
evidence was heard, the trial court considered argument of
counsel. The Attorney General represented to the court: "Our
main objective in this instant action is to preserve the
charitable assets until there has been a review of the financial
position of the foundation. . . ." He argued that the trial
court has "inherent authority" to appoint a receiver under these
circumstances, and that "the common law" relating to the
fiduciary duties of corporate directors applies to enable the
court to grant the motion.
During the hearing, the trial court inquired about "the
authority of the Court to grant the relief requested."
Addressing that inquiry, Wilcox argued: "Corporations are a
creature of statute. JOCO and Phoenix are both non-stock
corporations governed by the Virginia Non-stock Corporation Act
and not by common law. All of the authority cited by
petitioners are trust cases, have no applicability whatsoever."
She contended that the Attorney General must seek relief through
statutes dealing with corporations.
Upon consideration of the bill of complaint, the memoranda
of the parties, and counsel's argument, the trial court ruled in
a May 2001 order "that it lacks subject matter jurisdiction over
7
the Commonwealth's claims seeking appointment of a receiver and
a preliminary injunction" against corporate directors "because
the Commonwealth's exclusive remedy to address alleged breaches
of fiduciary duties owed by these . . . directors" is set forth
in Title 13.1 of the Code of Virginia, "which gives exclusive
jurisdiction to the State Corporation Commission."
Subsequently, the trial court denied the Attorney General's
motion for reconsideration and denied his request for a
temporary injunction pending appeal.
In September 2001, we awarded the Attorney General this
appeal from the May 2001 order, having previously ruled that the
order "disposes of the matter and, consequently, is a final
order subject to appeal under Code § 8.01-670."
Upon appeal, we shall consider only the procedural
circumstances of the suit, about which there is no dispute; we
shall not consider the myriad facts disclosed by the parties'
memoranda. From the standpoint of the individual defendants,
however, it must be noted that they deny all the Attorney
General's factual allegations of breach of fiduciary duties.
Those defendants contend they performed properly in an effort to
fulfill Jones' wish "of building an elementary school for
impoverished residents of one of the poorest neighborhoods in
the Dominican Republic." Wilcox asserted that this controversy
is generated by Jones' "disgruntled heirs."
8
In his assignments of error, the Attorney General contends
the trial court erred when it denied his motion for an
injunction and appointment of a receiver on the ground that the
court "lacks subject matter jurisdiction over claims for an
accounting, removal of directors and other equitable relief
asserted by the Commonwealth against directors of a charitable
foundation . . . based upon allegations that the directors
engaged in self-dealing, wasted foundation assets and breached
fiduciary duties owed to the foundation."
On brief, the Attorney General argues that the circuit
court sitting in equity possesses subject matter jurisdiction
"over the Commonwealth's suit for an accounting and equitable
relief against directors of a charitable foundation organized as
a Virginia non-stock corporation." Citing general statutory
authority, he says that Virginia circuit courts have broad
equity power over individuals and corporations, including the
power to grant injunctions. He argues the jurisdiction of the
State Corporation Commission is limited to the administration
and enforcement of laws dealing with corporations.
According to the Attorney General, "In numerous cases
decided by this Court, circuit courts have exercised subject
matter jurisdiction over claims challenging the conduct of
individual corporate directors."
9
Taking an alternative position, the Attorney General argues
that the circuit court "has the power to grant some if not all
of the relief requested by the Commonwealth." He acknowledges
it is generally held that the power of courts in reviewing the
internal management or policies of corporations is limited in
scope, citing Gottlieb v. Economy Stores, Inc., 199 Va. 848,
857, 102 S.E.2d 345, 352 (1958).
He also acknowledges that generally only members or
shareholders of a corporation have standing to challenge
internal management decisions of a corporation. However, he
argues, this rule does not apply "where the Corporation is also
a charitable foundation." The Attorney General principally
relies upon Tauber v. Commonwealth, 255 Va. 445, 499 S.E.2d 839
(1998), as authority for the latter proposition. He opines that
"[i]nasmuch as JOCO is a charitable foundation, it is
essentially a trust as well as a non-stock corporation," and
that he has the common law authority to act on behalf of the
public in such a case.
Summarizing, the Attorney General argues that the circuit
court has the authority to consider claims brought by the
Commonwealth against directors of a charitable foundation,
organized as a nonstock corporation, alleging the directors have
breached fiduciary duties, engaged in acts of self dealing, and
wasted foundation assets. The court has the power, the argument
10
continues, to order an accounting to ensure the funds are being
distributed in a way that satisfies the charitable purposes set
forth in the original articles of incorporation. Also, the
Attorney General contends, the circuit court "has inherent
ancillary authority" to award injunctive relief and appoint a
receiver.
Finally, the Attorney General argues that if "Dianne Wilcox
and the other individual directors of JOCO breached their
fiduciary duties when they amended the original Articles of
Incorporation to delete the geographic restriction on charitable
donations," the circuit court "may enter an order striking the
amendment and restoring the original Articles of Incorporation."
We do not agree with the Attorney General. We hold that
the trial court correctly ruled that it lacked subject matter
jurisdiction over the matters raised in this suit.
Initially, applicable general principles should be
reviewed. The phrase "subject matter jurisdiction" means the
power of a court to adjudicate a specified class of cases.
Subject matter jurisdiction is granted by constitution or
statute, and cannot be waived. Nelson v. Warden, 262 Va. 276,
281, 552 S.E.2d 73, 75 (2001). Whether a plaintiff has a common
law remedy is a question of subject matter jurisdiction. Counts
v. Stone Container Corp., 239 Va. 152, 153 n.1, 387 S.E.2d 481,
482 n.1 (1990).
11
A circuit court has "original and general jurisdiction of
all cases in chancery" except for cases "assigned to some other
tribunal." Code § 17.1-513. Every circuit court has
jurisdiction to award injunctions. Code § 8.01-620.
Among the powers and duties of the State Corporation
Commission (Commission) is the "duty of administering the laws
made in pursuance of [the Constitution of Virginia] for the
regulation and control of corporations doing business in this
Commonwealth." Va. Const. art. IX, § 2. "No court within or
without Virginia, except the Supreme Court by way of appeal as
authorized by law, shall have jurisdiction to review, reverse,
correct or annul any action of the Commission, within the scope
of its authority, . . . or to enjoin, restrain or interfere with
the Commission in the performance of its official duties."
Code § 13.1-813, a part of the Act. "In the administration and
enforcement of all laws within its jurisdiction, the Commission
shall have the power . . . to issue temporary and permanent
injunctions." Code § 12.1-13.
As we commence the analysis of the issue presented, certain
basic, undisputed circumstances should be made clear. First,
there has been no dissolution of either JOCO or Phoenix.
According to this record, those domestic corporations, duly
established by the Commission, are lawful, viable entities with
12
full power to operate within the authority granted by the
Commission.
Second, the gist of the plaintiffs' claim is an attempt to
inject the circuit court at the behest of the Attorney General
into the operating machinery of established corporate entities.
While the General Assembly, in Code § 55-532, has authorized the
Attorney General to "exercise his common law and statutory
authority" regarding certain nonprofit health care entities, and
to become involved in the disposition of assets, no such
specific power has been granted by the legislature regarding
nonprofit corporations devoted to charitable purposes.
Third, and to state the obvious, this suit is brought by
the Attorney General, and not by any director or other person or
entity with statutory standing having the authority to tinker
with corporate machinery.
And, fourth, the Attorney General's contention that the
circuit court has subject matter jurisdiction in this matter
advances the theory that a Virginia nonstock corporation devoted
to charitable purposes "essentially" is a charitable trust. No
direct authority is cited for this proposition and we have found
none. See generally IVA Austin Wakeman Scott & William Franklin
Fratcher, The Law of Trusts § 348.1, at p. 23 (4th ed. 1989)
("The truth is that it cannot be stated dogmatically that a
charitable corporation either is or is not a trustee"); Edith L.
13
Fisch et al., Charities and Charitable Foundations § 134, at p.
132 (1974) ("Despite its fundamental importance no clear answer
or decisive criterion exists for resolution of the question
. . . whether any particular asset of a charitable corporation
or association is held absolutely or in trust").
We shall now turn to the Attorney General's prayer for
relief and will demonstrate that the General Assembly has
decided that the forum for each type of relief sought is in the
Commission, and not the circuit court.
Significantly, the bill is labeled "Bill of Complaint for
Reformation and Removal of Directors," and the plaintiffs pray
for an order granting reformation and removal. Specifically,
the bill asks "that the current Articles of Incorporation of the
JOCO Foundation be rescinded and reformed. . . ," and "that the
court remove . . . Wilcox, Killinger and Jarrells as directors
of the JOCO Foundation and replace them with new, independent
directors."
The Act, in Code § 13.1-860, sets forth detailed procedures
for removal of directors, and the General Assembly has not
authorized the Attorney General to participate in that exercise
by prosecuting a suit in a circuit court. Code § 13.1-861
permits any member or director, not the Attorney General, to
contest an election of directors in an appropriate circuit
court. Code § 13.1-874 provides for removal of officers of
14
nonstock corporations, without any mention of the participation
of the Attorney General. Code §§ 13.1-884 through -893 control
the amendment of articles of incorporation, including addition
or deletion of provisions, under the supervision of the
Commission, without any participation in such reformation in a
circuit court at the relation of the Attorney General.
The prayer for relief also asks for appointment of a
receiver to conduct an accounting and to manage JOCO and Phoenix
until this suit is resolved, and for injunctive relief. In Code
§ 13.1-909, the General Assembly has given circuit courts
subject matter jurisdiction in the process of the dissolution of
nonstock corporations, but only after termination of corporate
existence. A circuit court has "full power to liquidate the
assets and business of the corporation at any time after the
termination of corporate existence . . . upon the application of
any person, for good cause, with regard to any assets or
business that may remain." § 13.1-909(B). In a proceeding
brought to dissolve such a corporation, a court "may issue
injunctions, appoint a receiver or custodian pendente lite with
such powers and duties as the court may direct, take other
action required to preserve the corporate assets where located,
and carry on the business of the corporation until a full
hearing can be held." § 13.1-909(E). Of course, in this case
there has been no termination of corporate existence, according
15
to the statutes providing for dissolution, to furnish the
predicate for appointment of a receiver to conduct the corporate
affairs.
The corporate existence of a nonstock corporation may be
terminated involuntarily by order of the Commission "when it
finds that the corporation (i) has continued to exceed or abuse
the authority conferred upon it by law. . . ." Code § 13.1-915.
Before entering such order, the Commission must issue a rule to
show cause against the corporation. The Commission may issue
the rule on its own "or on motion of the Attorney General." Id.
Of course, that has not happened here.
But, as we have said, the Attorney General maintains that a
proper forum for the relief he seeks in the prayer of the bill
is in the circuit court, principally relying on Tauber. In that
case, we said, "This Court long ago recognized the common law
authority of the Attorney General to act on behalf of the public
in matters involving charitable assets." 255 Va. at 451, 499
S.E.2d at 842. There, we held that the Attorney General could
properly assert jurisdiction in a circuit court over assets
located in Virginia held by trustees in dissolution of a foreign
charitable corporation. The trustees had been directors of the
corporation, which operated a hospital in the Commonwealth.
In that case, the charter of a Maryland charitable
corporation had been revoked by that state, which converted its
16
directors by operation of law to trustees in dissolution. Id.
at 455, 499 S.E.2d at 844. Because the charter revocation
terminated the entity's corporate existence, it could no longer
function as a corporation. The corporate assets, located in
Virginia, had automatically transferred to the directors as
trustees. Id., 499 S.E.2d at 845. There, unlike this case,
charitable assets were abroad in this State in the hands of
individuals who were trustees in dissolution; those assets were
not being held, as here, by a viable, lawful Virginia
corporation. Thus, we decided the Attorney General could act on
behalf of the public regarding the Tauber assets.
Addressing another issue in Tauber, we rejected the
defendants' contention that the litigation, dealing with
appropriation of charitable assets by directors for their
personal gain, involved impermissible interference by Virginia
with the internal affairs of a foreign corporation. Id. at 455-
56, 499 S.E.2d at 845. In that context, we said, quoting
Hanshaw v. Day, 202 Va. 818, 824, 120 S.E.2d 460, 464 (1961),
that contributions made to a charitable corporation and "the
assets realized therefrom were dedicated to those purposes and
stamped with a public interest by the charter, the laws of this
State, sound reason and public policy." 255 Va. at 455, 499
S.E.2d at 845. We also stated that "[t]he members acquired no
property rights in, nor were they equitably entitled to such
17
assets, either during the lifetime of the corporation or upon
dissolution." Id. "To hold otherwise," we said, "would convert
the public nature and purpose of the corporation into a vehicle
for the personal pecuniary gain of the members." Id.
Contrary to the Attorney General's argument, the fact that
members of a charitable corporation have no personal property
rights in corporate assets is not authority for permitting the
Attorney General, in a circuit court suit like this, effectively
to penetrate the corporate veil of an existing Virginia
corporation, or as the Attorney General urges, "to disregard, to
some extent, the corporate form."
As we have said, the Attorney General relies upon
"numerous" other cases decided by this Court in which he points
out "circuit courts have exercised subject matter jurisdiction
over claims challenging the conduct of individual corporate
directors." None of those cases is controlling here; we shall
address only several.
In Feddeman & Co. v. Langan Assocs., 260 Va. 35, 41, 530
S.E.2d 668, 672 (2000), a corporation brought a damage suit in a
circuit court against one of its competitors and against some of
its former directors for, among other things, breach of
fiduciary duties, a case wholly unlike the present case.
In Giannotti v. Hamway, 239 Va. 14, 28, 387 S.E.2d 725, 733
(1990), minority stockholders of a Virginia corporation sued in
18
a circuit court for liquidation of the corporation and
appointment of a receiver, alleging breach of fiduciary duties
by directors. That judicial proceeding, unlike the present
suit, was specifically authorized by former Code §§ 13.1-94 and
-95, predecessors to present Code § 13.1-748, a part of the
Virginia Stock Corporation Act. 239 Va. at 17, 18, 387 S.E.2d
at 726, 727. Adelman Assocs. v. Goldsten, 209 Va. 731, 737, 167
S.E.2d 104, 108 (1969), is a suit similar to Giannotti.
Finally, the Attorney General relies upon Stewart v. Lady,
251 Va. 106, 465 S.E.2d 782 (1996), for the proposition that the
circuit court has subject matter jurisdiction over this claim
challenging the conduct of directors. Actually, the case stands
for the opposite proposition.
In a dispute between two sets of directors of a nonstock
corporation, the Court held that election of directors was
governed by Code § 13.1-855(D) of the Act, and that the circuit
court had no jurisdiction to elect or appoint directors. We
rejected "the respondents' argument that the chancellor,
exercising his equitable jurisdiction, is empowered to declare
the respondents the lawful directors. Under the facts and
circumstances of this case, the chancellor has no statutory
authority to elect directors." 251 Va. at 114, 465 S.E.2d at
786.
19
In sum, the General Assembly has provided in Code § 13.1-
813 that "[n]o court within or without Virginia . . . shall have
jurisdiction to review, reverse, correct or annul any action of
the Commission, within the scope of its authority . . . or to
enjoin, restrain or interfere with the Commission in the
performance of its official duties." If circuit courts, at the
request of the Attorney General, are to have subject matter
jurisdiction over claims like those made in this suit, the
General Assembly has the power to so provide, as it did in Code
§ 55-432 when it authorized the Attorney General to exercise his
common law authority regarding certain nonprofit health care
entities. Under the existing common law and present statutory
scheme, however, the circuit court lacks subject matter
jurisdiction over this suit.
Consequently, finding that the trial court did not err in
denying the plaintiffs' motion for a preliminary injunction and
appointment of a receiver, the May 2001 order will be affirmed. ∗
Affirmed.
JUSTICE LEMONS, with whom JUSTICE KOONTZ and JUSTICE KINSER,
join dissenting.
∗
We have not overlooked that the chancellor, at the urging
of all parties, reluctantly indicated that he would order an
accounting, noting that such action could be viewed as
inconsistent with his ruling on jurisdiction. No accounting is
provided for in the May 2001 order, nor do we find any such
written order in this record. Therefore, the effect, if any, of
such a ruling on the issue we have decided is not before us, and
we express no opinion on it.
20
Because I believe that the circuit court has subject matter
jurisdiction over this controversy, I respectfully dissent.
The majority opinion holds that the circuit court would
have jurisdiction over this action brought by the Attorney
General if the entity involved were a trust rather than a
corporation. However, it is the nature of the claim not the
form of the entity involved in the claim that is dispositive.
The public interest in the proper disposition of charitable
assets is the same irrespective of the form of the entity
entrusted with the assets. Furthermore, we have previously
stated that a charitable corporation in this context is,
essentially, a trust. Finally, while the State Corporation
Commission may have jurisdiction over some of the claims in this
action, its jurisdiction is not exclusive.
In Tauber v. Commonwealth, 255 Va. 445, 499 S.E.2d 839
(1998), we stated in broad terms the authority of the Attorney
General to proceed in precisely the manner chosen in this case.
Although the Tauber case involved the assets of a dissolved
corporation, we stated the holding in terms of the nature of the
claim rather than the form of the entity: “This court long ago
recognized the common law authority of the Attorney General to
act on behalf of the public in matters involving charitable
assets.” Id. at 451, 499 S.E.2d at 842.
21
The reason for such broad language is found in the cases
cited by the Court in Tauber. In Hanshaw v. Day, 202 Va. 818,
120 S.E.2d 460 (1961), the Court noted:
The corporation was organized for charitable or
benevolent or literary purposes. Contributions
made to it and the assets realized therefrom
were dedicated to those purposes and stamped
with a public interest by the charter, the laws
of this State, sound reason and public policy.
The members acquired no property rights in, nor
were they equitably entitled to such assets,
either during the lifetime of the corporation
or upon dissolution. To hold otherwise would
convert the public nature and purpose of the
corporation into a vehicle for the personal
pecuniary gain of the members.
Id. at 824, 120 S.E.2d at 464, quoted with approval in Tauber,
255 Va. at 455, 499 S.E.2d at 845.
Also cited favorably by the Court in Tauber was the prior
decision in Clark v. Oliver, 91 Va. 421, 22 S.E. 175 (1895). In
that case dealing with funds diverted from one charitable cause
to another charitable cause, we rejected a claim by a
contributor and stated:
[W]hatever jurisdiction is thereafter
entertained by the courts with respect to the
disposition and control of this fund, must be
called into active exercise either by the
Attorney General, acting upon behalf of the
public, or by the trustees charged with its
custody and administration, or by some person
having a beneficial interest in the object of
the trust.
Clark, 91 Va. at 427-28, 22 S.E. at 177.
22
The majority opinion states that Code § 55-532 authorized
the Attorney General to exercise his common law and statutory
authority regarding certain nonprofit health care entities and
further states that “no such specific power has been granted by
the legislature regarding nonprofit corporations devoted to
charitable purposes.” The interpretation misreads the plain
import of the statute. The common law right of the Attorney
General to act in matters involving charitable assets is so well
accepted that the General Assembly recognized the right when it
enacted Code § 55-532 concerning the disposition of assets by
certain nonprofit health care entities. 1997 Va. Acts ch. 615.
In the section involving notice of intent to dispose of assets,
the statute provides in part: “The notice shall be given at
least sixty days in advance of the effective date of such
proposed transaction in order that the Attorney General may
exercise his common law and statutory authority over the
activities of these organizations.” Far from limiting the
Attorney General’s rights, this statute refers to and affirms
the broad power of the Attorney General irrespective of the form
of the entity. Certainly, such a construction of the statute is
required by the language of Code § 1-10 which provides: “The
common law of England, insofar as it is not repugnant to the
principles of the Bill of Rights and Constitution of this
Commonwealth, shall continue in full force within the same, and
23
be the rule of decision, except as altered by the General
Assembly.” Although the General Assembly may abrogate the
common law, its intent to do so must be plainly manifested.
Wackwitz v. Roy, 244 Va. 60, 65, 418 S.E.2d 861, 864 (1992).
The language of Code § 55-532 does not plainly manifest an
intent to abrogate the common law. To the contrary, it refers
to and affirms the broad powers of the Attorney General at
common law to act in matters relating to the disposition of
charitable assets irrespective of the form in which they are
held.
Additionally, we have recognized that legislative
enactments concerning director liability do not abrogate common
law duties of the director. See Simmons v. Miller, 261 Va. 561,
577, 544 S.E.2d 666, 676 (2001); Willard v. Moneta Building
Supply, Inc., 258 Va. 140, 151, 515 S.E.2d 277, 284 (1999).
Considering Code § 1-10 and the Court’s holdings in Miller and
Willard, and the plain meaning of the language of § 55-532, it
is clear that the General Assembly did not intend § 55-532 to be
limiting in nature.
The majority opinion limits the subject matter jurisdiction
of the circuit court to the disposition of charitable assets
held in the particular form of a trust. Rejecting the Attorney
General’s assertion that a nonstock corporation devoted to
charitable purposes is essentially a charitable trust, the
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majority states that: “No direct authority is cited for this
proposition and we have found none.” Apparently, the majority
has failed to recall the following statement of the law of the
Commonwealth in Tauber: “Under Maryland law, property of a
charitable corporation is held in trust for the public.
Inasmuch Gospel Mission, Inc. v. Mercantile Trust Co. of
Baltimore, 184 Md. 231, 40 A.2d 506, 510 (Md. 1945). Virginia
law is the same.” Tauber, 255 Va. at 455, 499 S.E.2d at 845.
Additionally, the majority holds that Code § 13.1-813
provides exclusive jurisdiction in the State Corporation
Commission over the claims involved in this case. The cited
provision states as follows:
No court within or without Virginia, except the
Supreme Court by way of appeal as authorized by
law, shall have jurisdiction to review,
reverse, correct or annul any action of the
Commission, within the scope of its authority,
with regard to any articles, certificate,
order, objection or petition, or to suspend or
delay the execution or operation thereof, or to
enjoin, restrain or interfere with the
Commission in the performance of its official
duties.
Code § 13.1-813.
The plain language of this statute neither establishes the
Commission’s jurisdiction over the claims in this case nor
divests the circuit court of its common law jurisdiction. The
statute by its terms prevents any other court, except the
Supreme Court upon appellate review, from altering action the
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Commission has taken. If the Commission has jurisdiction over
the claims in this case, it is concurrent with the circuit
court.
The circuit court has subject matter jurisdiction over
matters pertaining to charitable assets, and the Attorney
General has standing to seek judicial intervention to protect
the public’s interest. Code § 17.1-513 grants the circuit court
jurisdiction over chancery matters. Code § 8.01-620 gives the
circuit court jurisdiction to grant injunctive relief. It is
unnecessary in this dissent to address whether each form of
relief requested by the Attorney General is authorized by law.
The majority holds that the trial court did not err in its
determination that it did not have subject matter jurisdiction
over this controversy. I disagree and respectfully dissent.
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