Opinion ID: 2371910
Heading Depth: 1
Heading Rank: 2

Heading: Cross-appealcharitable immunity

Text: On cross-appeal, Conway Corporation asserts that the trial court erroneously ruled that it is not immune from liability for tort as a qualified charitable organization. Although we have not abolished the doctrine of charitable immunity, we give the doctrine a very narrow construction. See Williams v. Jefferson Hospital, 246 Ark. 1231, 442 S.W.2d 243 (1969). While we have not previously announced particular guidelines for considering whether an organization is entitled to charitable immunity, and recognize that cases in this regard are limited in number, we find the following list of factors considered in Davidson v. Colonial Williamsburg Foundation, 817 F.Supp. 611, 614 (E.D.Va.1993), instructive and proper for adoption: (1) whether the organization's charter limits it to charitable or eleemosynary purposes; (2) whether the organization's charter contains a not-for-profit limitation; (3) whether the organization's goal is to break even; (4) whether the organization earned a profit; (5) whether any profit or surplus must be used for charitable or eleemosynary purposes; (6) whether the organization depends on contributions and donations for its existence; (7) whether the organization provides its services free of charge to those unable to pay; and (8) whether the directors and officers receive compensation. [2] In adopting this list of factors, we recognize, as did the Virginia district court in Davidson , that this list is illustrative, not exhaustive, and no one factor is dispositive. Id. Considering Conway Corporation in light of these factors, we agree with the trial court's ruling that the Corporation is not entitled to charitable immunity. Granted, it is true that the Corporation articulated a charitable purpose in its articles of incorporation, as it stated that it was formed to aid educational institutions in the City of Conway, for which it was granted an exemption from both federal and state income taxation. Yet when measured against the aforementioned factors, Conway Corporation simply cannot be characterized as charitable. First, while Conway Corporation was created for charitable purposes, its directors have the authority to amend its articles of incorporation. Granted, the Corporation has in fact aided the City's educational institutions in accordance with the terms of its articles of incorporation. However, it has purchased fire trucks and the land for a city park in contravention to the articles. Other expenditures of the Corporation not authorized in the articles have included funds to purchase lands on which the Conway Human Development Center is located. In this vein, we recognize and adopt the position taken by the Arkansas Court of Appeals that, unless an entity performs as its articles state, it will not be entitled to charitable immunity. J.W. Resort, Inc. v. First American National Bank, 3 Ark.App. 290, 625 S.W.2d 557 (1981). Second, the articles of incorporation do not contain a not-for-profit limitation; rather, the articles state that any profits must pass directly to the City as a cost of operation. In looking to whether the Corporation earned a profit, Conway Corporation's financial records from 1987 to 1991 indicate that the percentage of revenues it donated was less than one half of one percent in two of those years, and never exceeded 2.65 percent during that time period. Moreover, the Corporation's average revenues for this time period was well over 20 million dollars per year, with net income for 1988 and 1989 being $1,885,358 and $1,759,780, respectively. It is also significant that, when looking at the fifth factor as to whether the Corporation's profits must be used to charitable purposes, the articles of incorporation do not require that the City use the money for a benevolent purpose. We have considered this factor as probative in Burgess v. Four States Memorial Hospital, 250 Ark. 485, 465 S.W.2d 693 (1971), where we stated that an organization is entitled to charitable status if its receipts are held in trust for the furtherance of its charitable purposes. While it is true that Conway Corporation's directors and officers do not receive compensation, it appears that the Corporation depends on rates from customers for electric service, rather than contributions and donations, for its existence, and that it does not provide free service to customers who are unable to pay for electric and other services that the Corporation provides. A simple overview reveals that Conway Corporation was formed to advance the economy of the City by keeping two parochial colleges within its limits. From there, it has grown into a commercial enterprise with a yearly net income near two million dollars, with omnibus donations to non-benevolent city concerns such as fire trucks, a city park, and the like. Under the totality of the relevant facts and circumstances, the trial court did not err in concluding that Conway Corporation was not entitled to charitable immunity. Reversed and remanded on direct appeal; affirmed on cross-appeal. BROWN, J., dissents. ROAF, J., not participating.