Title: Bailey v. Lancaster Ruritan Recreation Ctr.
Citation: N/A
Docket Number: 972112
State: Virginia
Issuer: Virginia Supreme Court
Date: September 18, 1998

Present:  All the Justices 
 
 
VICKI WATSON BAILEY, ADMINISTRATOR, ETC. 
 
 
 
OPINION BY JUSTICE A. CHRISTIAN COMPTON 
v.  Record No. 972112 
September 18, 1998 
 
LANCASTER RURITAN RECREATION 
CENTER, INC. 
 
FROM THE CIRCUIT COURT OF LANCASTER COUNTY 
Joseph E. Spruill, Jr., Judge 
 
 
The dispositive question in this negligence action is 
whether the defendant is protected from liability under the 
doctrine of charitable immunity. 
 
In June 1996, appellant Vicki Watson Bailey, Administrator 
of the Estate of April C. Watson, an Infant, Deceased, filed 
this action for damages under the death by wrongful act statutes 
against appellee Lancaster Ruritan Recreation Center, Inc.  The 
defendant, a nonstock corporation with its office and principal 
place of business in Lancaster County, owns, operates, and 
supervises a swimming pool on its premises. 
 
The plaintiff alleges that, on June 27, 1994, the decedent, 
her daughter, was a guest and invitee at defendant's facility 
for the purpose of swimming in the pool.  The plaintiff further 
alleges the decedent drowned that day as the result of the 
negligence of defendant's agents, servants, and employees. 
 
Defendant filed a grounds of defense denying it is indebted 
to the plaintiff.  It also filed a plea alleging plaintiff's 
claim is barred because defendant is a charitable corporation 
and plaintiff's decedent "was a beneficiary of the bounty of the 
charitable corporation." 
 
In May 1997, the trial court considered testimonial and 
documentary evidence during a hearing on the plea.  
Subsequently, in a letter opinion, the court sustained the plea, 
holding that defendant is a charitable corporation and that 
plaintiff's decedent was a beneficiary of its bounty.  We 
awarded plaintiff this appeal from a July 1997 order dismissing 
the action with prejudice. 
 
On appeal, the plaintiff assigns error to both rulings 
below.  Because of the view we take of the case, only the first 
issue requires discussion, that is, did the trial court err in 
sustaining defendant's plea in bar on the ground that defendant 
is a charitable institution? 
 
Under the doctrine of limited immunity applicable to 
charities in Virginia, a charitable institution is immune from 
liability to its beneficiaries for negligence arising from acts 
of its servants and agents, if due care has been exercised in 
their selection and retention.  Straley v. Urbanna Chamber of 
Commerce, 243 Va. 32, 35, 413 S.E.2d 47, 49 (1992).  Accord 
Moore v. Warren, 250 Va. 421, 422-23, 463 S.E.2d 459, 459 
(1995). 
 
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In order to determine if a corporation is a charitable 
organization, a court must examine the powers and purposes set 
forth in its charter to learn whether or not the corporation is 
maintained for gain or profit.  Danville Community Hosp. v. 
Thompson, 186 Va. 746, 753, 43 S.E.2d 882, 884 (1947).  The 
character of the organization may be ascertained not only from 
such powers and purposes but also from the manner in which it is 
conducted.  Id.  If an organization's charter sets forth a 
charitable purpose, there is a rebuttable presumption it is 
operating a charitable institution in accordance with such 
purpose.  Memorial Hosp. v. Oakes, 200 Va. 878, 883, 108 S.E.2d 
388, 392 (1959). 
 
In the present case, the defendant, which has no "official 
affiliation with Ruritan International," was established in 1964 
as a nonstock corporation.  According to the charter, its 
purpose is to operate "a civic center, club, social or 
recreation center" and to "provide funds for the carrying on of 
religious, charitable, scientific, literary, historical or 
education programs."  The charter further provides that no part 
of the funds shall "inure to the benefit of any trustee, 
director, or member of said corporation." 
 
From its inception, defendant operated a recreation center 
consisting of the swimming pool, a baseball diamond, a tennis 
court, and a concession stand.  Testimony showed the center was 
 
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organized so that "kids in the upper end of the county would 
have someplace to go and swim and play ball and whatever."  Due 
to lack of funds over the years to maintain all the facilities, 
only the pool remained in operation at the time of the accident 
in question. 
 
According to the bylaws, membership in the recreation 
center, which includes the privilege to use the pool, is 
restricted to "those members accepted for membership by action 
of the Board of Directors."  Initially, membership applications 
were to be accompanied by a $150 initiation fee plus annual dues 
of $30.  An application was accepted only upon a majority vote 
of the board of directors.  Membership entitled the family of 
the holder of a membership card to use the facilities.  
 
Nonmembers are allowed to use the pool as guests of a 
member by payment of a guest fee.  Nonmembers have been 
permitted to take swimming lessons given by the American Red 
Cross at the pool upon payment of a fee.  While not pertinent to 
the issue at hand because the facts relate to the period after 
the accident in question, the evidence showed that during 1995 
and 1996 children sponsored by the Young Men's Christian 
Association were permitted to use the pool.  The YMCA paid a fee 
of $1 per child. 
 
The membership procedure changed, however, in the "last 
couple of years" before the hearing on the plea in bar.  
 
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According to defendant's treasurer, "if anybody applied, we 
accepted them . . . [a]s soon as we got the money."  At the time 
of the hearing, the initiation fee was $400 and the annual dues 
were $200.  The treasurer testified that the "regular use of the 
facilities" remains "exclusively for the members and guests 
only," although no person has been denied membership. 
 
The funds generated by use of the pool have been employed 
to pay nominal salaries of the treasurer and the corporate 
secretary, to buy chemicals for the pool, to finance repairs, 
and to pay utility bills.  The treasurer, who has served in that 
position since 1990 and has been a member since 1966, testified 
the financial goal of the corporation "was to break even" and to 
"have enough to keep the pool up."  No compensation has been 
received by the other corporate officers.  According to the 
treasurer, no funds have been "devoted or donated" by the 
corporation to any religious, scientific, literary, or 
historical endeavor since 1990 because defendant "never had the 
money." 
 
The corporation is not exempt from local real estate taxes 
nor is it exempt from federal income taxes.  Federal tax returns 
dating from 1980 showed a small amount of taxable income was 
generated in 1991 and 1993 but the tax paid was recouped because 
of losses reported later.  During the other years, the defendant 
reported either no taxable income or a loss. 
 
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On appeal, the defendant contends the trial court correctly 
concluded that it is a charitable organization.  Arguing the 
charter sets forth a charitable purpose, that is, providing 
recreational facilities for the young people and residents of 
Lancaster County, defendant notes it is presumed to be operating 
a charitable organization in accordance with this purpose. 
 
Continuing, defendant refers to several evidentiary factors 
mentioned in case law on the subject, which, it says, confirm it 
was operating in accord with its charitable purpose at the time 
of the accident.  First, defendant says that to advance "its 
charitable purpose of providing educational programs" it allowed 
anyone, whether a member or not, to enroll in swimming lessons 
conducted by the American Red Cross upon payment of a fee.  
Defendant argues that use of the pool by the YMCA, as well as 
evidence the Boy Scouts of America has utilized the facilities 
for camping and meetings, are other examples of defendant 
advancing its educational and charitable programs. 
 
Second, defendant points to evidence that no corporate 
officer receives compensation, except the nominal amounts paid 
the secretary and treasurer.  Third, defendant says none of the 
meager "profits" has ever been paid to any person or entity, 
except as compensation for work performed.  "In short, all 
profits or surplus funds were devoted to the benevolent and 
charitable purpose of establishing and maintaining a 
 
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recreational facility for the citizens of Lancaster County," 
according to defendant.  Fourth, defendant points to evidence 
that it did not aggressively pursue debt collection against 
members who failed to pay dues, as another example of its 
charitable activity. 
 
Finally, defendant, responding to one of plaintiff's 
arguments, contends an organization is not required under 
Virginia law to "donate" funds in order to qualify as a charity.  
It says many charities, like defendant, provide services or 
construct facilities to advance their charitable purpose.  "In 
fact, typically, charities are the recipients of charitable 
donations, not the givers," defendant points out. 
 
We do not agree with defendant's contentions.  Even 
affording it benefit of the presumption, we hold defendant 
failed to carry the burden to prove it is a charitable 
institution. 
 
Given the structure of the corporation as set forth in the 
charter and bylaws, as well as its manner of operation, the 
record shows that defendant's overriding purpose is to own and 
operate a private recreation center for the exclusive use of its 
members and guests.  In other words, the defendant does not 
extend its benefits to an indefinite number of persons.  See 
Allaun v. First and Merchants Nat'l Bank, 190 Va. 104, 108, 56 
S.E.2d 83, 85 (1949).  Furthermore, the charter fails to state 
 
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any "not for profit" objective or any limitation requiring the 
corporation to be operated only in a nonprofit manner.  Indeed, 
the corporation has been conducted as a for-profit organization 
as demonstrated by its lack of exemption from income taxes or 
from local real estate taxes. 
 
Merely because the facilities have been made available 
"from time to time" to the Red Cross and the Boy Scouts, and 
because the corporation recently has been operated unprofitably, 
does not convert a for-profit operation to a charitable one.  
The only financial evidence offered in support of the plea in 
bar was the treasurer's recollections beginning in 1990 and the 
income tax returns from 1980 through 1994.  No financial data 
from the corporation's 1964 organization to 1980 was presented.  
The relevant financial history of a corporation, and not just 
recent unprofitable years, must be examined to properly 
determine charitable status.  The defendant had the burden to 
present such history and failed, or was unable, to do so. 
 
Consequently, we conclude that the trial court erred in 
sustaining the plea of charitable immunity.  We will reverse the 
judgment below and remand the case for further proceedings. 
Reversed and remanded. 
 
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