The Virginia Supreme Court ruled Tuesday that trust law applies to Sweet Briar College, giving hope to opponents of the college’s closure who argue that shutting down the school violates the terms of the will that established it in 1901.
The court sent the case back to circuit court and ruled that Bedford County Circuit Judge James Updike erred when he said he could not grant a temporary injunction in part because the law of trusts cannot apply to a corporation.
Ellen Bowyer, the county attorney in Amherst County who had sought the injunction, said she will ask Updike for a hearing between June 22 and 24 because “time remains of the essence.”
But college spokeswoman Christy Jackson said the decision is unlikely to “have significant impact on the pending litigation” because the court did not rule on the merits of any legal or factual issues before it, including whether Sweet Briar “is both a corporation and trustee or whether the Amherst county attorney has legal standing to file a claim under the Virginia Uniform Trust Code.”
With its ruling, the high court extended until June 24 the 60-day injunction Updike issued April 15 that bars the college from spending charitable contributions for the purpose of closing Sweet Briar.
Updike, however, had refused to issue an injunction to stop the actual closing. He said that as a corporation, Sweet Briar’s board of directors had the authority to determine that the college no longer could afford to stay open.
The justices, who heard the appeal of Bowyer’s case Thursday, disagreed with Updike’s conclusion that laws governing trusts do not apply to a nonprofit, nonstock corporation.
“This legal conclusion is erroneous,” the ruling said. “The law of trusts can apply to a corporation.”
Although the justices had the authority to act on the motion for a temporary injunction initially filed with the lower court, they decided it is the lower court that is in the best position to decide if an injunction is warranted.
Bowyer said she is hopeful that on reconsideration, “the circuit court will agree with my position: that Sweet Briar College is a trustee of the trust formed from Indiana Fletcher Williams’ will.”
However, Carl Tobias, a University of Richmond law professor who has been tracking the case, cautioned against “teasing out” too many conclusions from “the pretty terse language” of the decision.
“I’m pretty cautious about over-reading it, because I don’t think the court is saying very much about the merits with this ruling,” Tobias said.
The ruling says Updike got one thing wrong concerning trust law and should reconsider the injunction request in light of that, he said. “I don’t think it says much about what that resolution should be.”
But the ruling was welcomed immediately by opponents who are challenging the board’s surprise announcement March 3 that the private women’s college near Lynchburg will close permanently on Aug. 25.
With the trust issue resolved, “we will move to seek the appointment of a special fiduciary to assess the college’s true finances and determine what is needed to close the current funding gap to ensure the college can remain open,” Sarah Clement, chair of Saving Sweet Briar, said in a statement. The group said it has raised more than $16 million in pledges to save the school.
In addition to the 60-day injunction in Bowyer’s case, Updike also issued an injunction limiting the college’s ability to sell or dispose of assets in a suit filed by a group of students, alumnae and parents.
The college has appealed that injunction but it is one reason opponents fighting the board’s decision see the tide turning with Tuesday’s ruling.
With the high court’s decision, “students can arguably enforce trust restrictive covenants,” said Elliott Schuchardt, the attorney representing the student group.
“The Sweet Briar student group has repeatedly asked Attorney General Mark Herring to enforce the Sweet Briar restrictive covenants,” he said, and Herring has refused.
Herring “no longer has monopoly on enforcing restrictive covenants,” Schuchardt said.
Herring spokesman Michael Kelly declined to comment on the ruling but said mediation efforts to settle the dispute with all parties are ongoing.
“We are focused on facilitating the ongoing mediation to help the school and its stakeholders explore any possible paths forward and reach the best outcome possible in this extremely difficult situation,” he said.
In addition to complaints filed by Bowyer and Schuchardt, a suit filed by faculty alleging breach of contract is pending before the Bedford court.
The high court made note of the suits and the “widely publicized, closed-door negotiations.”
“The legal issues are still evolving, and the factual record underpinning the parties’ allegations and defenses has yet to be fully developed,” the court wrote. “In short, the controversy of the college’s scheduled closing is far from over, and all agree that the ultimate merits of the controversy are not, at least for today, squarely before this court.”
Tobias said the ruling “really drives back” to the importance of the mediation efforts. “The litigation is just going to go on and on, and the court warns about that.”
He said that “the practical reality is that time is just ticking away. If they’re going to be open next year, something’s got to give.”
Beyond the legal issues, the Sweet Briar case is being watched closely nationally by people in higher education, said Susan Whealler Johnston, executive vice president and chief operating officer for the Association of Governing Boards of Universities and Colleges.
The legal implications are specific to Sweet Briar and the way it was founded, she said.
The college was established by the General Assembly in 1901 through the bequest from Indiana Fletcher Williams, who left her estate to be used in perpetuity as a women’s college. What will happen to the 3,250-acre campus and the $85 million endowment are key issues in the dispute.
But within academia, people also are watching to see “what happens when a board decides a college is no longer sustainable,” said Johnston, who serves on the boards of the public Radford University in Virginia and the private Rollins College in Florida.
Other institutions are challenged financially, but Sweet Briar is one of the few to announce “we’ve taken it as far as we can,” she said. “It’s a rare thing for an institution to close. People are watching the process and result.”
With Tuesday’s opinion, the court emphasized “that our holding today does not rule upon the legal status of any particular party to this litigation.”
The court also did not “presently rule” on whether Bowyer has standing to act on behalf of the commonwealth — Herring filed a brief stating she does not.
Updike said Bowyer had standing to bring action under the Charitable Solicitations Act, which was the basis for his injunction blocking the spending of charitable donations. The high court said that “given our holding on the potential applicability of trust principles,” the justices did not rule on whether Updike could have issued a preliminary injunction halting the closing under that act.
Updike said because Sweet Briar was established by the General Assembly to carry out the terms of a will, the college was a corporation, not a trust. He cited the ruling in the suit over the decision to go co-ed by Randolph-Macon Woman’s College, now Randolph College.
But the high court noted that Randolph-Macon Woman’s College was not subject to the Uniform Trust Code because it was not a trustee of a trust “and not simply because the college is a nonstock charitable corporation.”