Saturday, June 7, 2008

Virginia Supreme Court Rejects Donors' Trust Law Based Challenge to Randolph-Macon College's Admission of Men

In Jenna Dodge v. Trustees of Randolph Macon Woman's College, a case decided yesterday, students alumni and donors sued the University alleging that it violated the Uniform Trust Code: 

The plaintiffs allege in their amended complaint that the College was established in 1891 for the primary purpose of educating women, and that all gifts and donations to the College since its inception were given to support that objective. The plaintiffs allege that the College acquired, improved, and maintained real property with funds donated to the College for the purpose of supporting the College as a liberal arts, educational institution for women. The plaintiffs also allege that the College acquired numerous valuable works of art placed in various locations "across [the College's] campus and in [its] Maier Museum" and that the art and "the facilities to house such works[,] were bought and improved and are maintained by funds donated to [the College] for the purpose of supporting . . . a liberal arts, single-sex educational institution." The plaintiffs allege that the College plans to sell assets, including its valuable art collection, to finance physical changes at the campus that will enable the College to educate both men and women. The plaintiffs also allege that the College plans to amend its articles of incorporation to reflect that the College will educate men and women. The plaintiffs further allege that the aforementioned acts are "contrary to [the College's] original and ongoing express charitable purpose as an institution created primarily to educate women in a liberal arts curriculum under the name of Randolph-Macon Woman's College."

From these facts, plaintiffs allege that the College violated its fiduciary duties owed to the plaintiffs who are intended beneficiaries, as well as its obligations under the State's Uniform Trust Law.  The court rejected the plaintiffs' claim.  A significant and contemporary issue is whether trust or corporate law should apply to nonprofit orgnanizations.  To that, the court stated:

We reject the plaintiffs' contention that Code § 2.2-507.1 requires the application of trust law, rather than corporate law, to the College, a nonstock charitable corporation. Acceptance of the plaintiffs' position would transform all charitable Virginia nonstock corporations into charitable trusts, and we find no language in [Virginia] Code §2.2-507.1 that manifests any intent of the General Assembly to make such a drastic change in Virginia's established law.

The case should provide interesting context for the debate regarding whether nonprofits should be governed under trust law or corporate law.

dkj

http://lawprofessors.typepad.com/nonprofit/2008/06/virginia-suprem.html

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