Court Opinion

ID: 3183815
Source: CourtListenerOpinion
Date Created: 2016-03-09 15:17:17.921968+00
Date Added: 2024-06-11T14:08:29.316984
License: Public Domain

Cite as 2016 Ark. App. 157

                ARKANSAS COURT OF APPEALS
                                     DIVISION II
                                    No. CV-15-792

                                               Opinion Delivered   March 9, 2016
GAIN, INC.
                             APPELLANT         APPEAL FROM THE PULASKI
                                               COUNTY CIRCUIT COURT,
V.                                             SEVENTEENTH DIVISION
                                               [NO. 60CV-13-4061]
MERANDA MARTIN, SUCCESSOR
SPECIAL ADMINISTRATRIX OF THE                  HONORABLE MACKIE M. PIERCE,
ESTATE OF VIRGIL BROWN, JR.,                   JUDGE
DECEASED
                     APPELLEE                  REVERSED AND REMANDED

                           M. MICHAEL KINARD, Judge

      Appellant Gain, Inc. (Gain), appeals from the trial court’s order denying its motion

for summary judgment based on the doctrine of charitable immunity. After a de novo

review, we conclude that the trial court erred, and we reverse and remand for further

proceedings.

      Appellee Meranda Martin, the administratrix of the estate of Virgil Brown, Jr.,

deceased, filed a wrongful-death and survival action against Gain and others in October

2013.1 Gain purports to be a charitable organization providing services to adults with

debilitating major mental illness. Martin asserted that Gain was negligent in providing

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          The other named defendants were Arch Insurance Company; Darrell Davis,
individually and as case manager and employee of Gain; and Dr. Leslie Smith, individually
and as medical director and employee of Gain. Arch was granted summary judgment, and
Martin filed an amended complaint. Martin subsequently filed a second amended complaint
against several other defendants who were later dismissed.
                                 Cite as 2016 Ark. App. 157

services to Brown and to Kenneth Ray McFadden, Jr., which resulted in McFadden killing

Brown. Gain filed a motion to dismiss and a motion for summary judgment, asserting the

affirmative defense of charitable immunity. Gain later filed an amended motion for summary

judgment, along with its articles of incorporation, bylaws, an affidavit from its executive

director, and documents to confirm its nonprofit and tax-exempt status.

       Martin filed a response along with several documents, including Gain’s application for

tax-exempt status and tax forms for the years 2007 through 2011. After a hearing, the trial

court entered an order denying Gain’s motion for summary judgment. The trial court found

that Gain had established a prima facie case that it was entitled to summary judgment, but

Martin had met her burden of rebutting Gain’s entitlement to the defense of charitable

immunity solely through her argument that Gain did not receive enough money in

contributions or donations to qualify for charitable immunity. Gain now appeals.

       As a general rule, the denial of a motion for summary judgment is neither reviewable

nor appealable. Arkansas Elder Outreach of Little Rock, Inc. v. Thompson, 2012 Ark. App. 681,

425 S.W.3d 779. The general rule does not apply, however, where the refusal to grant a

summary-judgment motion has the effect of determining that the appellant is not entitled to

its defense of immunity from suit, as the right of immunity from suit is effectively lost if a

case is permitted to go to trial. Id. This case is, therefore, appealable.

       The issue of whether a party is immune from suit is purely a question of law and is

reviewed de novo. Thompson, supra. Our standard of review for summary judgment is well

settled:

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       Summary judgment is to be granted by a trial court only when it is clear that there are
       no genuine issues of material fact to be litigated and the moving party is entitled to
       judgment as a matter of law. Once a moving party has established a prima facie
       entitlement to summary judgment, the opposing party must meet proof with proof
       and demonstrate the existence of a material issue of fact. After reviewing undisputed
       facts, summary judgment should be denied if, under the evidence, reasonable minds
       might reach different conclusions from those undisputed facts. On appeal, we
       determine if summary judgment was appropriate based on whether the evidentiary
       items presented by the moving party in support of its motion leave a material question
       of fact unanswered. This court views the evidence in a light most favorable to the
       party against whom the motion was filed, resolving all doubts and inferences against
       the moving party. Our review is not limited to the pleadings, as we also focus on the
       affidavits and other documents filed by the parties.

Jackson v. Sparks Regional Medical Center, 375 Ark. 533, 539, 294 S.W.3d 1, 4–5 (2009)

(citations omitted).

       The essence of the charitable-immunity doctrine is that entities created and

maintained exclusively for charity may not have their assets diminished by execution in favor

of one injured by acts of persons charged with duties under the entity. George v. Jefferson

Hospital Association, 337 Ark. 206, 987 S.W.2d 710 (1999). Because the doctrine favors

charities and results in a limitation of potentially responsible persons whom an injured party

may sue, we give the doctrine a very narrow construction. Thompson, supra. The burden

of pleading and proving this affirmative defense is on the party asserting it. Id. To determine

whether an organization is entitled to charitable immunity, our courts consider the following

factors:

       (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

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       unable to pay, and (8) whether the directors and officers receive compensation.

Thompson, 2012 Ark. App. 681, at 6, 425 S.W.3d at 784. These factors are illustrative, not

exhaustive, and no single factor is dispositive of charitable status. Id.

       The first and second factors are established by Gain’s articles of incorporation, which

provide that Gain is a public-benefit corporation under the Arkansas Nonprofit Act of 1993

and that its purposes include providing “integrated, comprehensive services for people with

mental illnesses, mental retardation, and other diagnoses that impair quality of life” and using

any funds “for charitable and educational purposes as a nonprofit corporation.” See Jackson,

supra; Anglin v. Johnson Regional Medical Center, 375 Ark. 10, 289 S.W.3d 28 (2008). Gain

also argues that it is a public charity that is tax exempt under section 501(c)(3) of the Internal

Revenue Code. Martin argues only that the articles of incorporation do not contemplate

providing services to “violent criminally insane” people like McFadden.

       Other evidence submitted by Gain as to the third, fourth, and fifth factors supports

Gain’s entitlement to charitable immunity. Dennis Wells, Gain’s executive director, stated

in his affidavit filed with Gain’s motion for summary judgment that Gain’s financial goal was

to break even on a yearly basis. Wells also stated that, since 2011, Gain had not made a profit

and had operated at a deficit in each of those years. In the event Gain did make a profit,

Wells noted that Gain was required to use the profit for charitable purposes. The articles of

incorporation provide that all funds collected shall be applied “to accomplish the purposes

for which the corporation is organized.”            Martin argues that Gain failed to provide

information on how its profits were used in years that it earned profits and why no profits

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were earned in other years, but she offered no evidence to rebut Gain’s assertions.

       The sixth factor considers whether the organization depends on contributions and

donations for its existence. Wells’s affidavit states that “Gain depends on contributions and

donations, along with state and federal financial assistance, Medicaid, and contracts with state

and federal agencies for its existence.” Martin argues that Gain was clearly dependent on

government grants and Medicaid for its operations, not private gifts and contributions, which

totaled only $660 in 2011. Martin contends that the lack of gifts and charitable contributions

is an issue that makes summary judgment improper.

       In Neal v. Davis Nursing Association, 2015 Ark. App. 478, 470 S.W.3d 281, we held

that the nursing home, which received only $100 in donations for two consecutive years,

clearly failed to satisfy this factor. In other cases, our supreme court has noted that modern

hospitals, with rare exception, would find it extremely difficult to operate wholly or

predominantly on charitable donations. Jackson, supra; George, supra. In Jackson, most of the

hospital’s operating funds were provided through Medicare, Medicaid, and individual

patients or their private insurers. The supreme court held that the fact that the hospital

received most of its funding through sources other than contributions or donations did not

negate its overriding charitable purpose.

       As for the seventh factor, Wells’s affidavit states that Gain has always provided its

services free of charge to those unable to pay. Gain also asserts that it satisfies the eighth

factor because, as Wells’s affidavit states, Gain’s officers and directors are all volunteers who

receive no compensation for their services. Gain’s bylaws and tax documents support this

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assertion. Martin made no argument disputing Gain’s evidence as to these factors.

       In addition to the eight factors, we have held that another relevant consideration is

whether the charitable-entity form has been abused. See Neal, 2015 Ark. App. 478, at 3, 470
S.W.3d at 283; Watkins v. Arkansas Elder Outreach of Little Rock, Inc., 2012 Ark. App. 301,

420 S.W.3d 477. The flow of money and the relationship between the facility and other

service providers can be critical to determining whether an entity is truly charitable or merely

a conduit through which to funnel money and divert profits. Neal, supra. Martin, however,

has not offered any argument or evidence that Gain conceals profits or otherwise abuses the

charitable-entity form.

       As the trial court found, Gain made a prima facie showing of entitlement to summary

judgment. Based on the totality of the evidence and the relevant considerations, we cannot

agree with the trial court that Martin met proof with proof sufficient to demonstrate a

genuine issue of a material fact when she rebutted the proof of only the single factor of

dependence on private donations. “No single factor is dispositive of charitable status.”

Thompson, supra. Entities with overriding charitable purposes do not lose entitlement to

charitable immunity based solely on the fact that they do not depend on donations. See

Jackson, supra; Anglin, supra; George, supra. Gain established that it was entitled to charitable

immunity, and the trial court erred in denying its motion for summary judgment. We

reverse and remand for further proceedings consistent with this opinion.

       Reversed and remanded.
       WHITEAKER and HIXSON, JJ., agree.

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Pinnacle Law Firm, PLLC, by: Matthew D. Campbell, for appellant.
Bennie O’Neil, for appellee.

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