Tauber v. Commw.,
No. 011150 (Va. April 19, 2002)

The Supreme Court of Virginia considered the actions of the trustees of a nonprofit hospital in manipulating the hospital's assets for over 20 years after the hospital lost its nonprofit status and corporate charter. Rather than winding up the activities of the hospital following the charter revocation, the trustees bought, sold, and leased the hospital's assets for their own private gain. The court held that the chancellor's decision to create a constructive trust into which the assets of the hospital were to be deposited was appropriate. The court further upheld the chancellor's decision to invoke the cy-pres doctrine to allow those assets to be used for a charitable purpose similar to that for which they had originally been donated. However, the court reversed the chancellor's decision to award only part of the diverted assets to the constructive trust. The court stated, that since the trustees never had any right to the assets of the hospital in the first place, they should not be allowed to keep any portion of the funds devoted for public purposes. Accordingly, the court increased the judgment against the trustees from $20 million to over $51 million.