Opinion ID: 1059334
Heading Depth: 1
Heading Rank: 3

Heading: chancellor's decision

Text: In a letter opinion dated July 13, 2000, the chancellor rejected the defendants' accounting. He observed that the methodology used by the defendants did not afford an opportunity to calculate the receipts, disbursements, rents, and profits that actually accrued to [the defendants]. The chancellor also found, in relevant part: [The defendants] obtained interests in real property, were paid dividends in excess of their capital contributions, and finally obtained a settlement of a dispute with Inova directly arising out of hospital operations. Under accepted principles, [the defendants] cannot profit from the wrong doing found by the Court and must be called to account for the profit obtained. In addition, where [the defendants], trustees in dissolution, commingle their interests with those of the charity, they bear the burden of proving the separate nature of the assets. [The defendants] have not met that burden. Hence, they are accountable for all of the assets, rents, profits, and receipts they obtained. The chancellor determined that JMHI's interest in the real property and improvements included a 70% interest in Hopkins Parcels 1 and 2, a 100% interest in the Berman parcel, which he referred to as Beauregard Street, and a 100% interest in the hospital improvements and the Beauregard Building. He concluded that the Commonwealth's accounting established that the defendants received net revenue through June 30, 1999 in the amount of $26,372,438. The chancellor also determined from the Commonwealth's accounting that the anticipated revenue from the 1994 INOVA Agreement through October 1, 2005, including the $10 million payment, was $24,703,145. These figures resulted in total net and future revenue in the amount of $51,075,583. The chancellor's ruling further provided, in relevant part: Under strict accounting rules, [the defendants] would be liable for the accrued revenues plus the present value of the future payments due from Inova. However, equitable principles require that a fairness test be applied to any award in this case. Since [the defendants] now hold valuable real estates as trustees in dissolution, and since the benefit to other charities will be substantial even if [the defendants] are not required to account dollar-for-dollar, and the purposes of this cause will be served, this Court finds that an award of Twenty Million Dollars ($20,000,000.00) in addition to the real property is fair and just under all of the circumstances. The chancellor also stated that he would consider further argument whether the defendants were entitled to a credit for costs of acquisition and improvements to the realty actually incurred. On November 13, 2000, a hearing was held in which the defendants presented evidence that Leslie P. Gondor, M.D., one of the defendants, paid $150,000 in 1964 to purchase an interest in certain real property from JMHI. Gondor made this purported purchase in his own name by means of an off-record letter transaction. At the same hearing, the defendants argued, among other things, that they should be given a credit for the construction costs of the hospital building, the Medical Office Building, and the Beauregard Building. In a letter opinion dated December 27, 2000, the chancellor denied the defendants' motion for acquisition and construction credits and their motion to release portions of the award to certain charities controlled by Tauber. The chancellor also denied the Commonwealth's motion for an award of attorneys' fees and costs. On February 21, 2001, the chancellor entered a decree incorporating his previous letter opinions and awarding judgment in favor of the Commonwealth as trustee against the defendants individually and as former directors and/or trustees and/or trustees in liquidation, and against JMHA, JMHJV, JCA, and Tauber as trustee and agent for JMHA and JMHJV. The chancellor further decreed that all of the assets referenced and described herein are subject to [the] constructive trust, including the anticipated revenue from the 1994 INOVA Agreement. The chancellor's decree directed that the assets subject to the constructive trust be distributed according to the doctrine of cy pres. In his decree, the chancellor also provided for interest on his award at the statutory rate of nine percent from July 13, 2000, the date the chancellor issued his opinion letter deciding the case in favor of the Commonwealth. The chancellor later held a hearing to set the amount of an appeal bond. He ruled that under Code § 8.01-676.1(C), he was obligated to require the posting of an appeal bond... with surety or an irrevocable letter of credit in an amount sufficient to pay [the] judgment. The defendants appealed from the chancellor's holdings. The Commonwealth assigned cross-error to the amount of the judgment and the chancellor's refusal to award the Commonwealth its attorneys' fees and accounting costs.