BAILEY v. LANCASTER RURITAN
September 18, 1998
Record No. 972112
VICKI WATSON BAILEY, ADMINISTRATOR, ETC.
LANCASTER RURITAN RECREATION
OPINION BY JUSTICE A. CHRISTIAN COMPTON
FROM THE CIRCUIT COURT OF LANCASTER COUNTY
Joseph E. Spruill, Jr., Judge
Present: All the Justices
The dispositive question in this negligence action is whether the
defendant is protected from liability under the doctrine of
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
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
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).
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
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
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.
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.
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 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 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.