WPC Wr"B1PihU4e0/`.jK"?#Y$L|%:f@N_Y oi ܬ)ֳ~A4LHI(ĽLV%i.`39Pp̟/%0U P:sh4>2֤0vo(ux]0%kDX=DuvTda{g[˳J~pwjUAA3T@)moC(A"Um:oke=k螙t++hwZ‹r-yˉ&8) FBݔr;?>7voWbH?& Zq$ۣ'Px0An(z.Y` KوCJ TkIa> կ'3 0v]3 0`3 0`34 0`4 0`4 0`S5 085 05 026 06 0:7 0Y%8 0_~8 0 8 0j9 0Q; B*< D/< 0.= D/> 0> 06? 0B? 0@ 0:A 0^B BpB 0<B 0B D5mC D-C 0KCU6D ASPDD 0iE 0D F AQFU>FU*:GdGlGEKVMeN}UPSTgZ[[E_a`%EbEbKjf]gi$k'o'ouuvy{{9}|}/N_ƍ>5КK"m0|ksU ٭ɵ^TKk5-sMHP LaserJet 4050 Series PCL 6,,,,0pA-s (`$.8dd8    ("  Z6Times New Roman Regular,-ing= C:\PROGRA~1\COREL\WORDPE~1\TEMPLATE\CUSTOM~1\REVISE~1.WPTC:\Program Files\Corel\WordPerfect Office 2000\Template\Custom WP Templates\revised standard opinion.wpt3|x-U R2$      8  %   _Mr.Madisonisthehusbandof_WillieAnn_ԀMadison.Level 1Level 2Level 3Level 4Level 5Level 1Level 2Level 3Level 4Level 5Level 1Level 2Level 3Level 4Level 5Level 1Level 2Level 3Level 4Level 5(#$  0   ^ R2$      13  %   _TheSupremeCourtfoundthatoverninetyninepercent(99%)of_CCFS_sfundingcamefromgovernmental  sources.Id.2002Tenn.LEXIS379,at*6,___S.W.3dat___. _ R2$      28  %   _%  %Whenaskedatoralargumenttobemorespecificregardingtheobjectionableevidence,counselresponded  thatitwasincludedinthedocumentsinBoxes3and4oftherecord.#%  %#ԀConsequently,inordertogivethorough t considerationtotheevidentiaryissues,wehaverelieduponthecorporationsidentificationinotherfilingsofthedisputed 8 material.2J+M 0_level1  X 2( ` hp x 223  ..  5+ ` hp x 5    R2$      63  %   _%  %_CCFS_Ԁcontendsthatallrelatedparty,conflictofinterest,orsimilartransactionsweredisclosedtoits  independentauditor,whoreportedtheminitsaudits.#%  %#2G+M 0_level2   /%` ` hp x /23  ..  5+ ` hp x 5  (hH  Z6Times New Roman Regular   * R2$      5  %   _Theothersidentifiedasofficersordirectorswere%  %WatsonAnderson,GwendolynMizell,andSamuelHingha.#%  %#2D+M 0_level3   ," hp x ,23  ..  5+ ` hp x 5  2A+M 0_level4  ` ) hp x )23  ..  5+ ` hp x 5  2>+M 0_level5   &hhp x &23  ..  5+ ` hp x 5  2;+M 0_level6   #p x #23  ..  5+ ` hp x 5  28+M 0_level7  h  p x 23  ..  5+ ` hp x 5  25+M 0_level8   pp x 23  ..  5+ ` hp x 5  22+M 0_level9    x 23  ..  5+ ` hp x 5  2JM 0_levsl1  X 2( ` hp x 223  Ԁ  5+ ` hp x 5  2GM 0_levsl2   /%` ` hp x /23  Ԁ  5+ ` hp x 5  2DM 0_levsl3   ," hp x ,23  Ԁ  5+ ` hp x 5  2AM 0_levsl4  ` ) hp x )23  Ԁ  5+ ` hp x 5  2>M 0_levsl5   &hhp x &23  Ԁ  5+ ` hp x 5  2;M 0_levsl6   #p x #23  Ԁ  5+ ` hp x 5  28M 0_levsl7  h  p x 23  Ԁ  5+ ` hp x 5  25M 0_levsl8   pp x 23  Ԁ  5+ ` hp x 5  22M 0_levsl9    x 23  Ԁ  5+ ` hp x 5  - -2JM 0_levnl1  X 2( ` hp x 223   5+ ` hp x 5  2GM 0_levnl2   /%` ` hp x /23   5+ ` hp x 5  2DM 0_levnl3   ," hp x ,23   5+ ` hp x 5  2AM 0_levnl4  ` ) hp x )23   5+ ` hp x 5  2>M 0_levnl5   &hhp x &23   5+ ` hp x 5  2;M 0_levnl6   #p x #23   5+ ` hp x 5  28M 0_levnl7  h  p x 23   5+ ` hp x 5  25M 0_levnl8   pp x 23   5+ ` hp x 5  22M 0_levnl9    x 23   5+ ` hp x 5  0.Normal<:Definition T<AA:Definition L , 5+ ` hp x 5  5+ ` hp x 586Definition(''&H1      XXX(&H2  XXX(&H3  XXX(&H4 XXX XXX(&H5  XXX(&H6  XXX20Address8MM6Blockquote , , 5+ ` hp x 5   5+ ` hp x 5,*CITE,dl*CODEK\<6X9`(Courier NewKXXXSb\  `&Times New RomanS42Emphasis64Hyperlink    <:FollowedHype    4go2Keyboard K\<6X9`(Courier NewK XXXSb\  `&Times New RomanS<:Preformatted/%  ,Kk %#/K\<6X9`(Courier NewKXXXSb\  `&Times New RomanS/%  ,Kk %#/<:zBottom of 7M(X7  ?c%2A`Arial?7Z(X7  XXXSb\  `&Times New RomanS&  d dL)1dxd<:zTop of For7O(X7  ?c%2A`Arial?7Z(X7  XXXSb\  `&Times New RomanSL)2dxd0KS.SampleK\<6X9`(Courier NewKSb\  `&Times New RomanS0.Strong (|G22$ !.8G-dd8         0  e8dl6TypewriterK\<6X9`(Courier NewKXXXSb\  `&Times New RomanS42Variable: 8HTML MarkupB       d2 0CommentB  (|3w$ !.8G-dd8     VVVV)!dxdx)!dxdx( $ Figure  1  <6X9`(Courier New^_X`YE<<CLevel 1Level 2Level 3Level 4Level 5(|3w$ !.8G-dd8     ($$   1  X[Z&OLE 2.0 Box <=8C HKKKK\  `&Times New Roman%2A`Arial   R2$      23  %   _UndertheRevisedModelNonprofitCorporationAct,theapprovalbythedisinterested,informedboardof  directorsofapublicbenefitcorporationmustbemadeinadvanceofthetransaction.%  %Ԁ_Brody_,supra,at142728;Moody, t supra,at268#%  %P#%  %.However,initsadoptionoftheRevisedAct,Tennesseedidnotadoptthe inadvancelanguage 8 appearingintheRevisedModelActsprovisiononapprovalbytheboardofdirectors.SeeRevisedModelNonprofit L Act8.31(1987);1Fletcher,supra,at2.75.10.#%  %# ; R2$      6  %   _%  %TheapplicationforRecognitionofExemptionunderSection501(c)(3)oftheInternalRevenueCodedefines  a disqualifiedperson,inrelevantpartas anypersonwho,iftheapplicantorganizationwereaprivatefoundation,is t ...[a]foundationmanager...[ora]memberofthefamilyofany[such]person....#%  %~#  R2$      65  %   _Basedonthesecriteria,itisarguable,andtheAttorneyGeneralhasargued,thattheactionsbytheoriginal  boardsinapprovingthevariouschallengedtransactionsdonotqualifyfortheprotectionofthebusinessjudgmentrule. t  [ R2$      15  %   _OnMay4,2001,anagreedorderofsaleandcompromisewasenteredbythetrialcourtapprovingthesale  ofcertainitems,primarilyofficefurniture,toWillieAnnMadisonandJohnMadisonfor$5,300. s R2$      9  %   _OthertestimonyandrecordsindicatethatasofDecember1999,thecorporationsproposedabudgettoDHS  apportioningMrs.Madisons$125,000salary,with$100,000tobepaidbyCCFSand$25,000by_CCN_.Anemployee t of_DHS_ԀtestifiedthattheDepartmentagreedtodividehersalarybetweenthetwoentitiesbaseduponherestimatethat 8 hertimewasroughlydividedbasedonthenumberofemployeeseachentityhad,approximately12%to_CCN_Ԁand88% L to_CCFS_.Thisdiscussionofsalarydoesnotaddressotheradditionalcompensationsuchasbonuses. R2$      2  %   _Atthattime,Mrs.MadisonwasWillieAnnDaugherty.  R2$      12  %   _Theaffidavitof_Dilworth_ԀWeathers,assistanttoMrs.Madison,states:  %  %8  In1999,theStateselectedCherokee[_CCFS_]toadministerthechildcarebrokerageprogramunder 8 thenewcostreimbursementsystem....#%  %#%  %Underthenewprogramputoutforbid,theselected L contractorwouldpaytheexpensesoftheprogramincompliancewithabudgetwhichhadbeenpre  approvedbythestate.Underthecostreimbursementcontract,theselectedcontractorwouldsubmit  totheState,onmonthlyvouchers,expensesincurredbythecontractorwhichthecontractorbelieved H  hadbeenincurredinaccordancewiththeStateapprovedbudget.#%  %# \   Thecorporationsbriefexplainsthatattheendof1998,whenCherokeewaspreparingtoapplyforthe2000broker    contract,itwasinformedthatitwouldbeareimbursement/grantcontract.Inordertoapplyforthatcontract,CCFSwas X   requiredtosubmitaproposedbudgettoDHSbeforeanyreimbursementclaimcouldbemade.  l     ] R2$      16  %   _%  %By1987Tenn.Pub.Acts,ch.242,TennesseeadoptedtheRevisedModelNonprofitCorporationAct,which  becameeffectiveJanuary1,1988.#%  %# Q R2$      53  %   _Although_CCFS_Ԁand_CCN_ԀdonotdisputetheexistenceoftheleaseforColonyParkorthetermsthereof,they  objecttotheexhibitsrelieduponbytheAttorneyGeneralinallegingthesefacts.Whilethefirstreferencetothelease t istoadocumentfiledapparentlywithoutasupportingdocument,theleaseinquestionactuallyappearsseveralplaces 8 intherecord,includingasanattachmenttoanaffidavitfroma_DHS_Ԁofficialcertifyingthat_CCFS_Ԁfiledtheleasein L supportofitsapplicationforreimbursement.  R2$      29  %   _Mr.Daviswasalsolistedasanincorporatorofbothcorporations,buthedeniedanyinvolvementintheir  initialorganization.  R2$      17  %   _%  %CharitablenonprofitorganizationsareexemptfromfederalincometaxationunderprovisionsoftheInternal  RevenueCode.Inaddition,entitiesexemptundersection501(c)(3)areentitledtoreceivetaxdeductiblecontributions t fromdonors.#%  %#  R2$      19  %   _%  %Thebeneficialtreatmentofnonprofitorganizationshasbeendescribedasfollows:  8  Nonprofitorganizationsreceivetheirmostconspicuouslyfavorabletreatmentthroughthetaxlaws. 8 Theyhave,historically,receivedprivilegedtreatmentinmanyotherareasofthelawaswell. L Specifically,_nonprofits_Ԁhaveenjoyedspecialtreatmentunderthelawsgoverningunemployment  insurance,bankruptcy,SocialSecurity,collectivebargaining,securitiesregulation,theminimumwage,  copyright,antitrust,customduties,andpostalrates.H    DevelopmentsintheLawNonprofitCorporations,supra,at#%  %#%  %167778.#%  %# A R2$      14  %   _Thereceiverreportedthat_CCFS_Ԁhad19,000sharesand_CCN_Ԁhad11,000,withatotalpurchasepriceof  $300,000. S R2$      7  %   _TheotherincorporatorslistedwereWilliamDavisandIdaPorter.BothMrs.PorterandMr.Davisdeniedany  involvementinthecreationorincorporationof_CCN_.  R2$      24  %   _%  %Tenn.CodeAnn.4858304providesthatadirectorwhovotesfororassentstoadistributionmadein  violationofthenonprofitcorporationstatutesanddoesnotcomplywithstandardsofconductestablishedinTenn.Code t Ann.4858301ispersonallyliabletothecorporation.#%  %#  R2$      21  %   _TheRevisedModelActprovisionsrejectedthetheorythatnonprofitcorporationsholdtheirassetsintrust  forthestatedpurposesatthetimeofacquisitionandthatthedirectorsaretrusteeswithrespecttothoseassets.Evelyn t _Brody_,TheLimitsofCharityFiduciary,57Md.L.Rev.1400,1427(1998);Moody,supra,at263.Adoptingthe 8 provisionfromtheRevisedModelAct,Tenn.CodeAnn.4858302(e)providesthat Adirectorshallnotbedeemed L tobeatrusteewithrespecttothecorporationorwithrespecttoanypropertyheldoradministeredbythecorporation,  includingwithoutlimitation,propertythatmaybesubjecttorestrictionsimposedbythedonorortransferorofsuch  property.  R2$      25  %   _Inadditiontotheprovisionauthorizingtheactionbroughtherein,%  %pursuanttoTenn.CodeAnn.4858  110(a)(1),theAttorneyGeneralmaybringanactiontoremoveadirectorofapublicbenefitcorporationwhois t  engagedinfraudulentordishonestconduct,orgrossabuseofauthorityordiscretion,withrespecttothecorporation. 8 Further,adissolvingpublicbenefitcorporationmustnotifytheAttorneyGeneralofitsintenttodissolveandthe L distributionofitsassets,andnoassetsmaybetransferreduntilthepassageoftwenty(20)days,consentbytheAttorney  General,ornoticethattheAttorneyGeneralwilltakenoactionregardingthetransfer.Tenn.CodeAnn.4864103.#%  %#  Underthissection,theAttorneyGeneralhas authoritytobringanyactionhedeemednecessarytoprotectthepublic H  interest....Stateexrel.AdventistHealthCare_Sys_.,914S.W.2dat906.Additionally,theAttorneyGeneralis  \ authorizedtobringanactiontoenjoinacorporateactonthegroundthecorporationlackedpowertoact.Tenn.Code   Ann.4853104(b). R2$      36  %   _ForFY1998and1999,thisamountincludespaymentsunderboththebrokerandfoodcontracts. R2$      37  %   _Thisamountincludespaymentsforbroker,food,registrationandtransportationcontracts.  R2$      35  %   _CCFSdoesnotdisputetheamountsreflectedherein,butdisagreeswiththe characterizationofthesource  ofthefundsassetoutintheAttorneyGeneralsstatementofundisputedfacts.Thereisnodisputeregardingthetotal t amountreceivedfromtheState,justwithwhatnametoapplytotherevenues.Thedisputeovercharacterizationappears 8 toberelatedtothedistinctionmadebyCCFSinitsForm990betweengovernmentgrantsandgovernmentfeesand L contractsforprogramservices.  R2$      40  %   _AnaffidavitfromthepresidentoftheaccountingfirmstatesthefirmwasapprovedbytheComptrollerto  performindependentauditsof_CCFS_Ԁand_CCN_,thattheauditreportsforFY96,97,98,and99werefiledwiththe t Comptrollersoffice,andthattheywereattachedtotheaffidavitasexhibits. R2$      51  %   _ThepurchaseoccurredonApril5,1999. / R2$      43  %   _AttheOctober4,2000Boardmeeting,theBoardapprovedandratifiedstudentloansmadepreviouslyto  IngridWarren,KendalRobinson,andJohnMadison,Jr.  R2$      38  %   _TherecordincludestheIRSForm990(ReturnofOrganizationExemptfromIncomeTax)filedby_CCFS_Ԁfor  1995,1996,1997,1998,and1999.Eachoftheseformswassignedby_WillieAnn_ԀMadisonasExecutiveDirectorand t JohnMadisonasPreparer.Mr.Madison,as_CCFS_saccountant,preparedtheForm990eachyearfor_CCFS_.Eachof 8 theformsintherecordisaccompaniedbya CertificateofOfficialRecordcertifyingthateachisatruecopyofthe L Form990for_CCFS_ԀandsignedbytheDisclosureOfficeroftheDepartmentoftheTreasury,InternalRevenueService.  Thecorporationsobjecttoconsiderationofthesedocumentsasunauthenticatedandinadmissible.Wedisagree.As  certifiedcopiesofofficialpublicrecords,theyareselfauthenticating.Tenn.R._Evid_.902(4). % R2$      1  %   _Thetrialcourtdenied_CCFS_sand_CCN_smotionforstaypendingappeal,rulingthatastaywould interfere  withtheAttorneyGeneralsrighttocarryouthisduties.Thecorporationssoughtastayfromthiscourt,whichwas t denied.Thus,theassetshaveremainedundertheprotectionofthereceiver. D R2$      42  %   _Forexample,IdaPorter,WilliamDavisandVivian_Braxton_Ԁwerelisted,respectively,asPresident,Secretary,  andTreasurerontheForm990sfor1995,1996,and1997.For1998and1999,_R.T._Ԁ_Joyner_,WilliamDavis,andVivian t _Braxton_ԀwerelistedasPresident,Secretary,andTreasurer. R2$      45  %   __CCFS_Ԁdescribestheseentitiesasad/b/aaccount. R2$      47  %   _Thetotalrentunderthisleaseforthefiveyeartermwouldamountto$360,000. R2$      46  %   _Thetotalrentoverthefiveyearperiodwouldamountto$257,982. U R2$      49  %   _RooseveltT.Joyner,VivianBraxton,andWilliamDavissignedtheresolution.BecauseMrs.Madisonwas,  inessence,AffordableHomesandreceivedthemoneypaidasbackrent,thetransactionisclearlyaconflictofinterest t transaction.BecauseofhisrelationshipwithMrs.Madison,Mr.Davishadanindirectinterestinthetransactionawarding 8 hisdaughterscompanybackrent.Thus,itappearsdoubtfulthattheresolutionapprovingthe$437,000paymentmet L theapprovalrequirementofTenn.CodeAnn.4858302(d)thatamajorityofdisinterestedboardmembersapprove  suchatransactionafterfulldisclosure. R2$      50  %   _ThenameactuallyappearsontheleaseasSourceOneManagementCorporation,amistake. R2$      48  %   _The9,700squarefeetincludedaswimmingpoolandatheater,andonly7,680squarefeetofofficespace.  R2$      26  %   _Thatruleprovides:  8  %  %InordertoassisttheCourtinascertainingwhetherthereareanymaterialfactsindispute,anymotion 8 forsummaryjudgmentmadepursuanttoRule56oftheTennesseeRulesofCivilProcedureshallbe L accompaniedbyaseparateconcisestatementofthematerialfactsastowhichthemovingparty  contendsthereisnogenuineissuefortrial.Eachfactshallbesetforthinaseparate,numbered  paragraph.Eachfactshallbesupportedbyaspecificcitationtotherecord.H    8  Anypartyopposingthemotionforsummaryjudgmentmust...filearesponsetoeachfactsetforth   bythemovanteither(_i_)agreeingthatthefactisundisputed,(ii)agreeingthatthefactisundisputed    forpurposesofrulingonthemotionforsummaryjudgmentonly,or(iii)demonstratingthatthefact X   isdisputed.Eachdisputedfactmustbesupportedbyspecificcitationtotherecord.Suchresponse  l  shallbefiledwiththepapersinoppositiontothemotionforsummaryjudgment. 0    Tenn.R.Civ.P.56.03. h  #%  %# 4 R2$      27  %   __CCFS_Ԁand_CCN_ԀalsofiledamotiontostrikemanyoftheexhibitsthattheAttorneyGeneralreferencedin  supportofhismotionforsummaryjudgmentandaccompanyingstatementofundisputedfacts.Thetrialcourtdidnot t ruleonthemotiontostrikepriortothegrantoftheAttorneyGeneralsmotionforsummaryjudgmentanddenialof 8 _CCFS_sand_CCN_smotionforsummaryjudgment.TheAttorneyGeneralpointsoutthatthemotiontostrikewasnever L setforhearing.Becausethiscourtisrequiredtoreviewtheevidenceinsupportofsummaryjudgmentanddetermine  anewwhetherjudgmentwasproper,dispositionofthemotionstostrikeisnotsignificanttoourscopeorstandardof  review.  R2$      30  %   _Rev.Joynerschurchoperatedadaycarecenterthatreceivedagrantof$5,000fromCCFSforplayground  equipment. R2$      32  %   _Rev.Joynerdescribedthisarrangementasa subcontract. + R2$      44  %   _Itisnotclearthatthese bonuseswereincludedinthecorporationsreportofcompensationtoMrs.Madison  andotherofficersordirectors.  R2$      52  %   _OnJuly2,1999,theMadisonsalsoconveyed2759ColonyParkDrivetoPhylissHerring,thesisterofMrs.  Madison,for$300,000. A R2$      20  %   _TheofficialcommentstotheRevisedActstatethatthegeneraldutyofloyaltyisfoundintherequirement  thatdirectorsactingoodfaithandinamannertheyreasonablybelieveisinthebestinterestofthecorporationandthat t thedutyofcareisstatedintheprudentpersoninalikepositionrequirement.RevisedModelNonprofitCorporation 8 Act8.3cmt.2and4(1987). R2$      54  %   _Thisstatementoffactwasundisputedbythecorporations.  R2$      39  %   _LoanstoofficersarespecificallyprohibitedbyTenn.CodeAnn.4858303.Forourpurposes,however,  itisnotnecessarytodeterminewhetherthistransactionwasoriginallyaloanorwasalwaysabonus.Ourfocusison t whetherthecorporationswereoperatedforpublicbenefitorprivategain. r R2$      55  %   _DarrellThomaswasalsoamemberoftheboardsofboththebankandtheholdingcompany.Hebecamea  memberoftheBoardof_CCFS_Ԁin1999,apparentlyafterthedecisiontoinvestinthebank. R2$      56  %   _Mrs.Madisonsignedtheresolutionasawitnessinhercapacityasexecutivedirector.  R2$      33  %   _Clarence_Mosley_,thecurrentChairmanoftheBoardof_CCFS_ԀistheownerofClarence_Mosley_ԀInsurance  Agency.HeisalsotheauthorizedagentofNationwideInsurance,theinsurerof_CCFS_._CCFS_Ԁhasdonebusinesswith t Clarence_Mosley_ԀInsuranceAgencysince1990._CCFS_ԀcurrentlypayspremiumsonatleastthreepoliciessoldbyMr. 8 _Mosley_,including:(1)acommercialumbrellapolicy;(2)abusinessautopolicy;and(3)abusinesspackagepolicy.Mr. L _Mosely_ԀwasnotontheBoardwhentheinitialinsurancepurchasesweremade.  R2$      34  %   _DarrellK.Thomas,thecurrentSecretaryoftheBoardof_CCFS_,istheChairmanandChiefExecutiveOfficer  ofThomasConsultants,Inc.,anequipmentrentalbusinessthathasdoneasignificantamountofbusinesswith_CCFS_. t Mr.ThomasalsoservesontheBoardofDirectorsofabankandbankholdingcompanyinwhichthecorporations 8 invested.Again,itdoesnotappearthatthebusinessrelationshipwithhiscompanyoriginatedwhileMr.Thomaswas L ontheBoardof_CCFS_. K R2$      59  %   _Vivian_Braxton_ԀandDonnaGravesresignedfromtheBoardonNovember30,1999,andDarrellThomaswas  electedsecretary.Rev._Joyner_ԀresignedonMarch23,2000,andMrs.Porteragreedtoactaschairmanoftheboard.On t May30,2000,theBoardvotedtoacceptClarence_Mosley_Ԁasamember,andhewaslaterelectedchairman.  R2$      60  %   _Thatprovisionallowsindemnificationofanofficer,tothesameextentofadirector,forexpenses,including  counselfees,incurredwithrespectto anythreatened,pending,orcompletedaction,suitorproceedingwhethercivil, t criminal,administrative,orinvestigativeandwhetherformalorinformal.Tenn.CodeAnn.4828501(7).A 8 corporationmayindemnifyadirectormadeapartytosuchaproceedingbecauseofhisstatusasdirector,if:(1)the L individualactedingoodfaith;(2)iftheconductwasinthecapacityofcorporatedirector,theindividualreasonably  believedthathisorherconductwasinthecorporationsbestinterestand,iftheconductwasnotmadeinthecapacity  ofacorporatedirector,thattheconductatleastwasnotopposedtothecorporationsbestinterests;and(3)inthecase H  ofanycriminalproceeding,theindividualhadnoreasonablecausetobelievetheindividualsconductwasunlawful.  \ Tenn.CodeAnn.4558502(a).  R2$      31  %   _Eventually,Rev.JoynerresignedfromtheCCFSBoardofDirectorsbecausehefeltitwasaconflictof  interesttoownadaycarecenterandsimultaneouslyserveontheBoardofDirectors.Hetestifiedthatnewrequirements t fromDHSindicatedsuchaconflict.HealsobasedhisresignationonhisformationofMemphisandShelbyCounty 8 ChildCareProvidersAssociation,anassociationthatoperatesmoreorlesslikeaunion.Hefeltthatregulationswould L precludehimfromalsoservingontheCCFSBoardofDirectors.  R2$      62  %   _Thenewbylawsprovidethatanyindemnificationshallbemadebythecorporationonlyuponadetermination  inaspecificcasethatindemnificationisproperbecausetheofficerordirectorhasmettheapplicablestandardofconduct. t Suchdeterminationisrequiredtobemadebyamajorityvoteofaquorumconsistingofmemberswhowerenotparties 8 tosuchactionorproceedingor,ifnosuchquorumisobtainable,byindependentlegalcounselorbythemembers. R2$      61  %   _AttendingthemeetingwereMr._Mosley_,Mr.Thomas,Rev.WareandMrs.Porter.  R2$      3  %   _Thepurposessetforthintheoriginalcharterwere:  %  %0  (a)Toprovidecomprehensivesocialserviceforyoungpeoplefrominfancythroughnineteen(19)yearsofage 8 whoareteenagemothers,handicapchildren,underachieversinschoolandspecialproblemchildren.L(#(# 8  (b)Tomobilizeandutilizeresources,bothpublicandprivate;tooffercontinuousandprogressively  comprehensivesocialservicesappropriatetoourtargetgrouporclientele.H    8  (c)Todoanythingnecessaryandproperfortheaccomplishmentoftheforegoingpurposeandgoals,   providedsameisnotinconsistentwiththelawsoftheStateofTennesseeandtheUnitedStatesof    America.#%  %# A R2$      64  %   _IfweacceptthecorporationsstatementthatMrs.Madisoncontinuouslyreceivedsalaryincreasesreaching  asalaryof$125,000bytheyear2000,thecorporationsstatementthathercompensationinFY9899was$125,000, t andthecorporaterecordsthatshewasawardeda$50,000bonusinDecemberof1998,wemustconcludethathersalary 8 waslessthan$100,000priortoFY19992000.  R2$      41  %   _Thecorporationshaveobjectedtoconsiderationof manyoftheboardminutesaswithoutproper  authenticationandcontaininginadmissiblehearsay.TheminutesofOctober4,2000,however,wereexhibitstoan t authenticatingaffidavitofthecorporatesecretary.Wealsonotethat_CCFS_Ԁtakesthepositionthattheloanidentifiedby 8 theauditorsin1996wasimproperlyrecordedandwasreallyabonus.Wefoundnoevidenceintherecordtosupport L thatstatementotherthantheseminutesandtheauditorsengagementmemoofJune30,1997.Inaddition,alltheBoard  minutesintherecordwereattachedtoandauthenticatedbythedepositionandaffidavitoftheformerandcurrent  secretary.  R2$      22  %   _ԀThiscourthasstated:  8  Thedutyofloyalty[inaforprofitcorporation]inessenceinvolvesconflictingeconomicorother 8 similarinterest[and]istransgressedwhenacorporatefiduciary,whetherdirectororofficer,useshis L orhercorporateofficetopromote,advanceoreffectuateatransactionbetweenthecorporationand  suchperson,andthattransactionisnotsubstantivelyfairtothecorporation.   Hallv.TennesseeDressedBeefCo.,No.01A019510CH00430,1996Tenn.App.LEXIS384,at*16(Tenn.Ct.App.  \ June28,1996)(noTenn.R.App.P.11applicationfiled)(quoting3FLETCHER,supra,at837.60).  R2$      57  %   _Accordingtothecorporationsbrief,_CCFS_Ԁmadetheentirepurchase,and19,000sharesweretitledinthe  nameof_CCFS_,while11,000sharesweretitledinthenameof_CCN_Ԁ anddonatedtothatentity.  R2$      4  %   _AccordingtoCCFS,manyoftheorganizersofCCFSwereearlychildhoodeducatorsorchildcareproviders  and,consequently,therehadalwaysbeenanemphasisonhelpingparentstoobtainchildcareservices,andthecharter t wasamendedtoreflectthispurpose.  R2$      10  %   _TheTennesseeSupremeCourtrecentlystatedthat:  8  Thefirstcontract,executedin1990,wasagrantcontractunderwhichCherokeeperformedservices 8 onacostreimbursementbasis.PriortothecommencementofanyworkbyCherokee,theStatewould L approve allowablecostsinadvance,thenCherokeewouldspendfundstoperformtheworkand  invoicetheStateforreimbursementoftheapprovedcosts.   Memphis_Publg_ԀCo.v.CherokeeChildren&Family_Servs_.,Inc.,No.M20002382SCR11CV&No.M200001705  \ SCR11CV,2002Tenn.LEXIS379,at*6,___S.W.3d___,___(Tenn.Sept.5,2002). # R2$      11  %   _TheSupremeCourtfoundthat:  8  Thesecondcontract,ineffectfrom1992to1999,changedthemethodofpaymenttoafeeforservices 8 arrangement,underwhichCherokeewaspaida commissioncalculatedasapercentageofthefunds L disbursedby_TDHS_ԀtodaycarecentersasaresultofCherokeesadministrativeservices.Themoney  receivedbyCherokeeunderthe1992contractwasdependentonlyonsatisfactoryperformanceofthe  workandonthetotalfundsdisbursedbytheStatetodaycareservices;theStatedisclaimedany H  responsibilityforlossesortaxesincurredbyCherokeeintheperformanceofthecontract. \   Memphis_Publg_ԀCo.,2002Tenn.LEXIS379,at*6,__S.W.3dat___.  R2$      58  %   _TheinvestmentdecisionwasclearlyaconflictofinteresttransactionbecauseofMrs.MadisonsandRev.  Joynersinvolvementwiththebank.Approvalbytheboardforsuchatransactionrequiresapprovalbyamajorityof t themembersoftheboardwhohavenodirectorindirectinterestinthetransaction.Tenn.CodeAnn.4858303(d). C R2$      18  %   _Ms.MoodywaschairoftheNonprofitCorporationsCommittee,SectionofBusinessLawoftheAmerican  BarAssociationwhichdraftedtheRevisedModelNonprofitCorporationAct. !.8_=dd8     _  _=8XXdd8  OYр__@ U_=INTHECOURTOFAPPEALSOFTENNESSEE  @kk$ATNASHVILLE#_=U>#Ԉ &   October9,2001Session L XX_= #_=XX&#PAULG.SUMMERS,etal.v.CHEROKEECHILDREN& J FAMILYSERVICES,_INC.,etal.XX_= _  ^ @@ AppealfromtheChanceryCourtforDavidsonCounty  ^ @@No.002988IIrvin_Kilcrease_,Jr.,Chancellor  J @@*AV) ` dE<` A "  @@TT_No.M__2001_00880_COA__ԄR3_CV_ԄFiledSeptember26,2002_   AV) ` dE<` A      Inthisappeal,theAttorneyGeneralfiledsuittodissolvetwononprofitpublicbenefitcorporations.   BoththeAttorneyGeneralandthenonprofitcorporationsfiledmotionsforsummaryjudgment.The  trialcourtgrantedsummaryjudgmentfortheAttorneyGeneralfindingthatthenonprofit x corporationshadabandonedtheircharitablepurposesanddevotedthemselvestoprivatepurposes. d Thetrialcourtorderedtheappointmentofareceivertomarshalandpreservetheremainingassets. P Forthefollowingreasons,weaffirmthedecisionofthetrialcourt.#_=XX#XX_= <  Tenn.R.App.P.3AppealasofRight;JudgmentoftheChanceryCourt d AffirmedandRemanded P    #_=X#XX._=PatriciaJ.Cottrell,J.,deliveredtheopinionofthecourt,inwhichBenH._Cantrell_,_P.J._,M.S., ( andWilliamB.Cain,J.,joined.  AllanJ.Wade,ThomasLang_Wiseman_,andLori_Hackleman_ԀPatterson,Memphis,Tennessee,for  theappellants,CherokeeChildrenandFamilyServices,Inc.,andCherokeeChildrenNutrition,Inc.  PaulG.Summers,AttorneyGeneralandReporter;AlbertL._Partee_,SeniorCounsel;GeorgeS.Bell, `!  III,AssistantAttorneyGeneral;MichaelA.Meyer,AssistantAttorneyGeneral,fortheappellee,the L"! AttorneyGeneralofTennessee. 8#" _  OPINION #_=XX #XX_= %` $ #_=XXU #  XX_=  ThisisacaseoffirstimpressioninthisStatewhereintheAttorneyGeneralsoughtto &8"& involuntarilydissolveCherokeeChildrenandFamilyServices,Inc.( _CCFS_)andCherokee '$#' ChildrenNutrition,Inc.( _CCN_)viatheauthoritygrantedinTenn.CodeAnn.4864301(a)(1). ($( _CCFS_Ԁand_CCN_Ԁaretworelatednonprofitpublicbenefitcorporationsthataretaxexemptunderstate )$) andfederallaw.TheAttorneyGeneralsoughtappointmentofareceivertomarshaltheremaining *%* nonprofitassets,dissolvethecorporations,anddistributetheassetstoother legitimatenonprofit +&+ organizations.Heallegedthat_CCFS_Ԁand_CCN_ԀhadrepeatedlyviolatedtheTennesseeNonprofit p,', CorporationActandspecificallyquestionednumeroustransactions,including:(1)rentalofproperty \-(- ownedbytheexecutivedirectortothecorporations;(2)hiringoftheexecutivedirectorshusband  _as_Ԁaccountantforthecorporation;(3)investmentof_CCFS_Ԁmoniesinalocalstartupbank;and(4)  severaltransactionsandpurchasesbythecorporationforthebenefitoftheexecutivedirector,her  family,and_friends._______ t   AhearingwasheldinDavidsonCountyChanceryCourtregardingamotionfortemporary L  injunctionandappointmentofacustodian_pendente_ԀlitefiledbytheAttorneyGeneral.Thetrial 8  courtenteredatemporaryinjunctionrequiring_CCFS_Ԁand_CCN_Ԁtograntaccesstotheirrecordsby $ t theAttorneyGeneral,toprotectandpreserveallbooksandrecords,andtoadheretoa$50,000a  ` monthbudgetforsixmonths.Thetrialcourtdeclinedtoappointacustodian_pendente_Ԁliteatthat  L  time.Bothpartiesthenfiledmotionsforsummaryjudgment.  8    Sixmonthslater,thetrialcourtheardoralargumentonbothmotionsforsummaryjudgment.   TheChancellorgrantedtheAttorneyGeneralsmotionforsummaryjudgmentandmadethe   followingfindings:   8  1.0`   thattheAttorneyGeneralisentitledtoareceiverfordefendantsandis p entitledtoproceedwithdissolution;\` `  8  2.0`   thattheDefendantshaveabandonedtheirpublicpurposesandhavedevoted H themselvestoprivatepurposes;4` `  8  3.0`   thatthisisnotinkeepingwiththeTennesseeNonprofitAct; p` `  8  4.0`   thattheAttorneyGeneralhastheauthoritytotakeactionunderhisstatutory  \ supervisorypowerover_nonprofits_Ԁandasarepresentativeofthepublic H interest;and4` `  8  5.0`   thatthereisanimmediateneedfortheAttorneyGeneraltotakeoverthe   assetsofthedefendants;.... ` `    Thetrialcourtappointedareceiverandenumeratedhisdutiesandresponsibilitiesaswellas  thescopeofhisauthorityunderTenn.CodeAnn.4864303._ #  1      _Ԁ    _CCFS_Ԁand_CCN_Ԁappealarguingthatthetrialcourtimproperlygrantedsummaryjudgment X  infavoroftheAttorneyGeneralandimproperlydeniedtheirownmotionforsummaryjudgment. D! _____  $X" ___  ___________I._Background__  _XXXX_  _WillieAnn_ԀMadisonj #  2      ׀incorporated_CCFS_Ԁasanonprofitpublicbenefitcorporationin  Decemberof1989undertheauspicesoftheTennesseeNonprofitCorporationAct,Tenn.CodeAnn. t 48_Ԅ51_101etseq.AccordingtoacharteramendmentmadeApril19,1990,thepurposesofthe ` corporationwere:T #  3       L  8   `     8  ...toprovidetransitionalchildcareservicesforchildrenoflowincomefamilies $ t referredbytheDepartmentofHumanServices.Fundsforthisprojectareprovided  ` byFederalandStateblockgrantswhichareusedfortuitionpaymentsand  L  administrativeexpenses. 8    #XXXX!#XXXX8  Theservicesprovidedby_CCFS_Ԁincludelistingandclassificationofchildcare   providers,referralsofqualifiedfamiliestoappropriatechildcarecenters,andthe   monitoringandsupervisionofeachplacementunderguidelinesprovidedby_DHS_.   Uponthedissolutionof_CCFS_,allremainingassetswillbereturnedtotheFederal   andStateofficeswhichsuppliedtheoriginalgrants.  #  4      ׀p     _CCFS_Ԁhadnomembers.Accordingtothecharter,asamended,_CCFS_Ԁwasintendedto H operateasacharitableorganizationwithinthemeaningofsection501(c)(3)oftheInternalRevenue 4 Codeof1986.#XXXX%#XXXXԀInfact,theamendedcharterincludedthefollowinginitsstatementofpurposes:  p 8  ...exclusivelyreligious,charitable,scientific,literary,andeducationalwithinthe H meaningofsection501(c)(3)oftheInternalRevenueCodeof1986orthe 4 correspondingprovisionofanyfutureUnitedStatesInternalRevenuelaw.    8  Notwithstandinganyotherprovisionofthesearticles,thisorganizationshallnotcarry  onanyactivitiesnotpermittedtobecarriedonbyanorganizationexemptfrom  Federalincometaxundersection501(c)(3)oftheInternalRevenue_Code_Ԁof1986or  thecorrespondingprovisionofanyfutureUnitedStatesInternalRevenuelaw.   #XXXX)#XXXX  OnoraboutJune18,1990,_CCFS_Ԁfiledanapplicationforexemptionunder501(c)(3)ofthe t InternalRevenueCode.TheIRSapprovedtheapplicationfortaxexemptstatus.Intheapplication, ` _CCFS_ԀrepresentedthatneitherMrs.Madison,WilliamDavis(Mrs.Madisonsfather)noranyother L  individuallistedasanofficerordirector #  5      ׀weredisqualifiedpersonsfT #  6      ׀withrespecttotheorganization. 8  _CCFS_Ԁrepresentedthatitsfacilitiesoroperationswouldnotbemanagedbyanotherorganizationor $ t individualunderacontractualagreementandthattheorganizationwasnotapartytoleases._CCFS_  ` assertsthatthesestatementsweretrueatthetimetheyweremade,butcouldhavechangedthereafter.  L    __CCFS_ԀenteredintoacontractwiththeTennesseeDepartmentofHumanServices( _DHS_) $  toprovidechildcarebrokerageservicestolowincomefamiliesinShelbyCountyin1990._CCFS_   alsocontractedwith_DHS_ԀtoprovidemealandrelatedadministrativeservicesundertheChildand   AdultCareFoodProgram( _CACFP_)andcertainotherservicesforunderprivilegedchildren._CCFS_Ԁ   beganprovidingregistrationandtransportationservicesundercontractswith_DHS_Ԁin1998.#XXXX-#XXXXԀ_CCFS_   continuedtoworkpursuanttocontractswith_DHS_Ԁuntilthecontractswereterminatedin2000.#XXXXr5# p     OnNovember2,1998,_CCN_Ԁwasincorporatedasapublicbenefitcorporation._CCN_Ԁwas H organizedtohandlecertainportionsofthefoodprogramforwhich_CCFS_Ԁwasresponsiblein 4 accordancewithcontractsbetween_CCFS_Ԁand_DHS_.Ontheinitialcorporatepaperworkfiledwith  p theSecretaryofState,_WillieAnn_ԀMadisonwaslistedastheincorporator.sh #  7      ׀XXXXTheCharterfiledwith  \ theSecretaryofStatewasafillintheblankformanddidnotindicatethepurpose.However,inits H applicationfortaxexemptstatus,_CCN_Ԁattachedthefollowing,entitled,Charter,PartIIIActivities 4 andOperationalInformation:   8  TheCherokeeChildrenNutrition(_CCN_)willbecharteredbytheStateofTennessee.  Itsmissionistoserveminoritychildren,infantstoageseventeen,inwaysthatare  educational,nutritional,healthful,andwithsocial[sic]socialservices.Thetarget  areaistheCityofMemphis,TennesseewithintheCountyofShelby.l   8  A.CCNwillprovidebrokeringservicestoallknow[sic]areachildcareproviders. D! CCNwillworkwithclientstoenablethemtoidentifyaccessible,safeandsanitary 0"  childcareplacements.#l!    $X" 8  B.CCNwillprovideandsetupbeforeandafterschoolprogramsfortheschoolaged  childuptonine(9)yearsold.   8  C.CCNwilloverseebasicandspecialtyhealthandnutritionalservices.t   8  D.CCNwillserveasaresourcetochildcareprovidersintraining,physical L  improvements,andothercomponents.8    8  E.CCNproposestoprovidepersonalandsocialcounselingtoAFDCfamiliesatthe  ` earliestpossibledate. L    8  F.FundingSources:Federalgrants,federal/statefundsandgrants,USDAFood $  Program,fundraisers,anddonations.    8  SUMMARY:Theplightofminoritychildrendeservesurgentattentionandactionfor   care,enrichment,educationandgeneralservices.CherokeeChildrenNutrition   (CCN)isformedtorespondpositivelyandculturallytotheseneedsofagrowing p populationwhowillbecomeourleaders,parents,andprofessionals.\     TheCharterofCCNwasamendedin1999toreflectanewaddress.#XXXXD9#CCNalsohadno 4 members.CCNalsofiledanapplicationwiththeIRSforexemptionunder501(c)(3)oftheInternal  p RevenueCode.InCCNsIRSexemptionapplication,Mrs.Madison,Mr.Davis,JohnMadisonSr.,  #  8        \ andIdaPorterwerelistedastheExecutiveDirector,Secretary,Treasurer,andChairpersonofthe H BoardofDirectors,respectively.TheapplicationstatedthatMrs.Madisonwastheonlypersonthat 4 receivedcompensationfromthecorporationandthattheamountofthatcompensationwas$50,000.iT #  9      ׀   CCNrepresentedthatnoneoftheofficersweredisqualifiedpersonswithrespecttotheorganization   andthatthecorporationwasnotcontrolledbyanyotherorganization.CCNfailedtoanswerthe  questionofwhetheritwastheoutgrowthof(orsuccessorto)anotherorganizationorwhetherithad  aspecialrelationshipwithanotherorganizationbyreasonofinterlockingdirectoratesorother  factors.CCNalsostatedthatitsfacilitiesandoperationswouldnotbemanagedbyanother l organizationorindividualunderacontractualagreementandthatitwasnotapartytoleases.The X  IRSapprovedtheapplicationfortaxexemptstatus. D!   0"    Underthe1990contractwithDHS,theStatecompensatedCCFSandCCNbyreimbursing  thecompanyforexpensesincurred. #  10      ׀Thecontractsineffectfrom1992to1999significantly   changedthepaymentprogrambyprovidingthatCCFSandCCNwouldbepaidapercentage  (between3%and3.5%)ofthefundsDHSpaidtodaycarecentersforCherokeeplacedchildren. t CCFSwasnotrequiredtoreportitscoststoDHSunderthistypeofcontract.t #  11      ׀FromJanuary1, ` 2000,toAugust21,2000,thepartiesoperatedunderathirdcontractthatrevertedtothecost L  reimbursementplan.k #  12       8    OurSupremeCourthasrecentlydescribedtherelationshipbetweenCCFSandtheState:  ` 8  Between1990and2000,CherokeecontractedwithTDHStoperformcertain  8  functionsrelatedtogovernmentsubsidizedchildcareservicesinShelbyCounty.It $  isimportanttonoteherethatCherokeedidnotcarefororkeepchildreninthe   strictestsense.Rather,itservedasabrokeringagencythatscreenedapplicantsand  assistedeligibleapplicantsinlocatingapprovedchildcareproviders.TDHSpaidthe  childcaresubsidiesdirectlytothecarecenters;Cherokee,therefore,wasnot  involvedinthepaymentofsubsidiesforthechildcareservices.Virtuallyallof t Cherokeesoperatingrevenue,however,camefromgovernmentsources.`   MemphisPublgCo.v.CherokeeChildren&FamilyServices,No.M20002382SCR11CV&No. 8  M200001705SCR11CV,2002Tenn.LEXIS379,at*5,___S.W.3d___,___(Tenn.Sept.5, $ t 2002).  `   AstheSupremeCourtfound,thevastmajorityoftheincomeofbothCCFSandCCNhas  8  comefromcontractswithDHSorothergovernmentprograms._ #  13      _ԀThetotalrevenuereceivedfrom $  _DHS_Ԁby_CCFS_Ԁand_CCN_,includingearnedcommissions,was$3,055,004in1998,$6,869,465in   1999,and$4,910,477.08in2000.Allof_CCFS_semployeesperformedservicesunderthecontracts   withthestate.Id.     Mrs.MadisonhasbeentheExecutiveDirectorof_CCFS_Ԁand_CCN_Ԁsincetheirinception.Her p compensationincludedasalaryand,fromtimetotime,shehasreceivedadditionalcompensation \ orbonuses.Accordingto_CCFS_,thisadditionalcompensationwasbasedonthesuccessofthe H program. 4   TheStatecanceleditscontractwith_CCFS_ԀbyletterdatedAugust21,2000,which  \ terminationwastobeeffectiveSeptember22,2000._CCN_ԀreceivedaletteronAugust21,2000, H terminatingitscontractwith_DHS_Ԁeffectivethatday. 4   AftertheAttorneyGeneralbegantheinvestigationthatledtotheinstitutionofthisaction,   thecurrentBoardofDirectors,whichconsistsoftwolongtimemembersandtwonewmembers,  undertooktoreviewpastcorporateactionortransactions,includingrelatedpartytransactions,aswell  astheallegationsofthecomplaintregardingmisapplicationorwastingofassets.TheBoardratified  manyofthepriortransactions,institutednewcontrols,reduceditsoperatingexpensessignificantly l becauseofthelossoftheStatecontracts,andsettledanissueofrentoverpayments,asmorefully X  discussedbelow. D!   Thecorporateassetsof_CCFS_Ԁremainingwerereportedbytheappointedreceivertoinclude #l!  approximately$288,000incashinvariousaccounts;three(3)vehicles;30,000sharesofstockin $X" OY    MemphisFirstCommunityBank;r #  14      ׀realproperty;andofficeequipment.h #  15      ׀CNNsassetsincluded   approximately$2,900incashinaccounts.Theremainingassetsofthesenonprofitcorporationsare  whatisatstakeinthislitigation.TheAttorneyGeneralsoughttohaveareceiverappointedto  identifyandprotectthoseassetsandtodistributethemtoothernonprofitentitiesafterdissolution t ofthecorporations.Thecorporationssoughttomaintaincontroloftheassets. `   II.TheIssues 8  _XXXX  TheAttorneyGeneralsactionisbasedonTenn.CodeAnn.4864301(a)(1)which  ` authorizesacourttodissolveanonprofitcorporationinanactionbroughtbytheAttorneyGeneral  L  ifitisestablishedthatthecorporation:#XXXX`#  8    8 `  ` x` x 8  (A)Obtaineditscharterthroughfraud;      (B)Hasexceededorabusedtheauthorityconferreduponitbylaw;   8  (C)Hasviolatedanyprovisionoflawresultingintheforfeitureofitscharter;    8  (D)Hascarriedon,conducted,ortransacteditsbusinessoraffairsinapersistently   fraudulentorillegalmanner;p   8  (E)Isapublicbenefitcorporationandthecorporateassetsarebeingmisappliedor \ wasted;orH   8  (F)Isapublicbenefitcorporationandisnolongerabletocarryoutitspurposes; 4 provided,thattheenumerationofthesegroundsfordissolutionshallnotexclude  p actionsorspecialproceedingsbytheattorneygeneralandreporterorotherstate  \ officialsforthedissolutionofacorporationforothercausesasprovidedinthis H chapterorinanyotherstatuteofthisstate;....4     Insuchaproceeding,thecourtalsohasauthorityto issueinjunctions,appointareceiveror   custodianpendentelitewithallpowersanddutiesthecourtdirects,takeotheractionrequiredto  preservethecorporateassetswhereverlocated,andcarryonthebusinessofthecorporationuntila  fullhearingcanbeheld.Tenn.CodeAnn.4864302(c).XXXX    Onappeal,theAttorneyGeneralarguesthatseveralofthestatutorygroundswereestablished: X  (1)thecorporationsabandonedtheirpublicpurposeandhavebeendevotedtoprivategainand, D! consequently,thecorporateassetsweremisappliedorwasted;(2)thecorporationshaveoperatedin 0"  apersistentlyfraudulentandillegalmanner;and(3)thecorporationsareunabletocarryouttheir #l! nonprofitpurposes. $X"   Inresponse,thecorporationsarguethat:(1)theAttorneyGeneralfailedtoallegeorshowthat %0!$ thecorporationsconductedtheirbusinessinapersistentlyfraudulentorillegalmanner;(2)the &"% AttorneyGeneralfailedtoprovethatCherokeescorporateassetsweremisappliedorwasted;(3)the  AttorneyGeneralcannotshowthatthecorporationsarenolongerabletocarryouttheirpurposes;  and(4)thebusinessjudgmentrule,pleadasanaffirmativedefense,insulatescertaincorporate  actionsbycreatingapresumptionoftheregularityofbusinessdecisions,andtheAttorneyGeneral t failedtoovercomethatpresumption.Inaddition,thecorporationsassertthatsummaryjudgment ` wasimproperbecausetherearedisputedmaterialfacts,theAttorneyGeneralfailedtomeethis L  burdenofprovingthatdissolutionwaswarranted,noexpertproofwaspresentedonissuesrequiring 8  suchproof,andthecorporationspresentedtheirownexpertprooftorebutseveralclaims.Finally, $ t thecorporationsassertthatsomeofthedocumentsandrecordsfiledbytheAttorneyGeneralin  ` supportofthemotionforsummaryjudgmentwereunauthenticatedandcontainedsomeinadmissible  L  evidence,shouldnothavebeenconsideredbythetrialcourt,butcouldhavebeensoconsidered.  8    III.NonprofitCorporations   5p  ThetwocorporationswerebothformedpursuanttotheTennesseeNonprofitCorporation   Act,Tenn.CodeAnn.4851101et.seq.l #  16      ׀NonprofitcorporationsinTennesseecanbereligious   corporations,publicbenefitcorporations,ormutualbenefitcorporations.Tenn.CodeAnn.4852 p 102(a)(2).Bothcorporationshereinarepublicbenefitcorporations. \ 8  Nonprofitcorporationscanbedividedintotwoclasses.Onecalleddonative 4 nonprofitsorpublicbenefitcorporations;theothercalledcommercialnonprofitsor  p mutualbenefitcorporations.Thedonativetypeisgenerallyacharitableorganization  \ providingservicetothegeneralpublic.H   19WilliamMeadeFletcheretal.,FletcherCyclopediaoftheLawofPrivate   Corporations2:15(Perm.ed.1994)(citationsomitted).UndertheRevisedModelNonprofit   CorporationAct,publicbenefitcorporationsaretreateddifferentlyfromtheothertwoclassifications  inseveralareas,including:(1)theabilitytomakedistributionstomembersorcontrollingpersons  and(2)thesupervisorypowersvestedintheattorneygeneralofthestateofincorporation.    Bothcorporationshereinalsoappliedforandreceivedtaxexemptstatusunder501(c)(3) X  oftheInternalRevenueCode,andbothadoptedcorporatestatementsindicatingtheirintentwasto D! operateasa501(c)(3)#XXXXg#XXXXԀorganization.o #  17      ׀Thatsectionexemptsfromtaxation corporations,andany 0"  communitychest,fund,orfoundation,organizedandoperatedexclusivelyforreligious,charitable, #l! scientific,testingforpublicsafety,literary,oreducationalpurposes.Italsorequiresthat#XXXXw#XXXXԀ nopart $X"  ofthenetearningsof[theexemptorganization]inurestothebenefitofanyprivateshareholderor $D # individual.Thisprohibitiononthedistributionofnetearningsisreinforcedbyfederalregulations  interpreting501(c)(3)#XXXXy#XXXX:#XXXX{#XXXX   8  [A]norganizationisnotorganizedoroperatedexclusivelyforoneormore t [charitablepurposes]...unlessitservesapublicratherthanaprivateinterest.... ` [I]tisnecessaryforanorganizationtoestablishthatitisnotorganizedoroperated L  forthebenefitofprivateinterestssuchasdesignatedindividuals,thecreatororhis 8  family,shareholdersoftheorganization,orpersonscontrolled,directlyorindirectly, $ t bysuchprivateinterests. `   Treas.Reg.1.501(c)(3)1(d)(1)(ii)(asamendedin1991).  8  #XXXXH{#XXXX  Thesedefinitionsdescribethemostcommonlyusedandunderstoodmeaningascribedto    nonprofitentities. Nonprofitcorporationsgenerallyarerecognizedtobepublicorcharitablein   nature.StateexrelBoonev.Sundquist,884S.W.2d438,444(Tenn.1994).#XXXX\~#XXXXԀAbasicdistinction   betweenforprofitandnonprofitentitiesisthepossibilityofprivateenrichment.Thus, [i]ngeneral   terms,anonprofitenterpriseisanorganizationinwhichnopartoftheincomeisdistributabletoits p members,directorsorofficers....#XXXX#XXXXԀRonaldLeeGilman,TennesseeCorporations11B1 \ (2001).Tobemoreprecise,#XXXX#XXXX H 8  ...onecrucialfeaturedistinguishesnonprofitcorporategovernancefromthatoffor  p profitcorporations:nonprofitcorporationsaresubjecttothenondistribution  \ constraint.Thenondistributionconstraintpreventstheorganizationfrom H distributingitsnetearningstothoseincontrolofthecorporation;....#XXXX:#XXXX4   DevelopmentsintheLawNonprofitCorporations,105Harv.L.Rev.1578,1582(May1992)   (footnotesomitted).    Infact,ithasbeenstatedthat,#XXXX#XXXX [t]hebasicquestiontobeaskedindeterminingwhethera  corporationisnonprofitiswhetherthecorporationisbeingexploitedfordirectmonetarygain. l Fletcher,supra,at68.05.Thereisnoprohibitiononanonprofitcorporationconducting X  enterprisesforincomeorfromaccumulatingearnings.However,suchrevenuesmustbeusedfor D! thepurposessetforthinthecharterandtheremustbenopecuniarygaintotheincorporatorsor 0"  members,andnodistributionofincomeorprofitstothem.Id. #l!   UndertheModelNonprofitCorporationAct(1964)a notforprofitcorporationwas $D # definedasacorporationnopartoftheincomeofwhichisdistributabletoitsmembers,directorsor %0!$ officers.ModelNonprofitCorporationAct2(1964);Fletcher,supra,at68.05.Although &"% theRevisedModelActdidnotretainthisdefinition,thatdecisionhasbeenexplainedasfollows: '#& 8  TheDraftingCommittee,ontheotherhand,tookthepositionthatprovisionsofthe )$( RevisedActsuchastheelectionbetweenpublicbenefitandmutualbenefitstatus, |*%) thelimitationsondistributionstomembersorcontrollingpersonsinapublicbenefit h+&* corporation,restrictionsonunreasonablecompensation,andtheregulatorypowers  oftheattorneygeneralprovidedampleregulationtoinsurenonprofitoperation.In  addition,theDraftingCommitteehadconcludedthattheabilityofanycorporation  tolimitthecorporatepurposesinitsarticlesofincorporationprovidedample t protectionandallowedthecorporationtoobtaintaxexemptstatusandattractspecific ` contributions.L    #XXXXU#XXXXLizabethA.Moody, #  18      ׀TheWho,What,andHowoftheRevisedModelNonprofitCorporationAct, $ t 16N.Ky.LRev.251,281(1988).#XXXX#XXXX  ` #XXXXώ#XXXX  Thisprohibitionondistributionofcorporateassetsorearningstothoseoperatinganonprofit  8  corporationhasbeenreinforcedbyspecificstatutoryprovisions.#XXXX&#ԀUnderTenn.CodeAnn.XXXXԀ4863 $  101anonprofitcorporationmaymakenodistributionsthatarenotauthorizedby#XXXXL#Tenn.CodeAnn.   XXXXԀ4863102.Thatsectionprovidesthat#XXXX##XXXXapublicbenefitcorporationmaymakedistributionstoits   members:(1)whoarepublicbenefitcorporations;and(2)ifinconformitywithitscharitable   purposes.#XXXX#Tenn.CodeAnn.XXXXԀ4864102#XXXX#XXXX(b). Distributionisdefinedas thedirectorindirect   transferofassetsoranypartoftheincomeorprofitofacorporation,toitsmembers,directors,or p officers.Tenn.CodeAnn.4851201(11).Thus,incombination,thesestatutesclearlyprohibit \ thetransferofassets,income,oraccumulatedrevenuetoanyindividualwhoisamember,director, H orofficerofthecorporation.Thestatutoryexceptiontothatprohibitionisfoundinthedefinition 4  distribution.#XXXX#XXXXԀ  p   Distributiondoesnotinclude: H 8  (A)Thepaymentofcompensationinareasonableamounttoitsmembers,directors,   orofficersforservicesrendered;    8  (B)Conferringbenefitsonitsmembersinconformitywithitspurposes;   8  (C)Repaymentofdebtobligationsinthenormalandordinarycourseofconducting  businessactivities;or   8  (D)Theincurrenceofindebtedness,whetherdirectlyorindirectly(includingthrough l aguaranty),fororonbehalfofamember,directororofficer.X    Id.#XXXX#XXXX 0"    Inadditiontotheselimitationsondistributions,nonprofitcorporationsarespecifically $X" prohibitedfromlendingmoneyto,orguaranteeingtheobligationof,adirectororofficerofthe $D # corporation.Tenn.CodeAnn.4858303.#XXXX#XXXX %0!$   &"%   Nonprofitcorporationsareeligibleforbeneficialtreatmentinanumberofareas,_p #  19      _   particularlytaxation.Suchtreatmentisinrecognitionofthebenefittothepublicgoodresulting  fromtheworkofmostnonprofitorganizations.Exemptionfromfederaltaxationandtax  deductibilityofdonationsarebenefitsofclassificationasa501(c)(3)entity,butthatclassification t isbaseduponessentiallycharitablepurposeswherethepublicgoodisserved,nottheprivateinterest ` ofanycorporateinsider. L    Thefederaltaxexemption,whichhasappearedinfederaltaxstatutessince1894,seeks to $ t encouragethedevelopmentofprivateinstitutionsthatserveausefulpublicpurposeorsupplement  ` ortaketheplaceofpublicinstitutionsofthesamekind.#XXXX[#BobJonesUniv.v.UnitedStates,461U.S.  L  574,588,103S.Ct.2017,2026(1983).Itistheunmistakablelegislativeintentthatentitlementto  8  501(c)(3)taxexemption dependsonmeetingcertaincommonlawstandardsofcharitynamely $  thataninstitutionseekingtaxexemptstatusmustserveapublicpurposeandnotbecontraryto   establishedpublicpolicy.Id.461U.S.at586,103S.Ct.at2026.Theobjectiveoftheexemption   wastopromotecertaincharitablepurposes,atermthathasbeenusedinthelawofcharitabletrusts   forhundredsofyears.Id.461U.S.at588,103S.Ct.at2026. XXXX      Similarly,theTennesseeConstitutionauthorizesthelegislaturetoexemptfromtaxation \ propertyheldandusedforpurposespurelyreligious,charitable,scientific,literary,oreducational. H Tenn.Const.art.II,28.Thelegislaturehasenactedstatutesprovidingforsuchexemption,buthas 4 specificallystatedthepropertyofinstitutionsshallnotbeexemptif:  p 8  Theorganizationthereofforanysuchavowedpurposebeaguiseorpretensefor H directlyorindirectlymakinganyotherpecuniaryprofitforsuchinstitution,orforany 4 ofitsmembersoremployees,orifitnotbeingoodfaithorganizedorconducted   exclusivelyforone(1)ormoreofthese[religious,charitable,scientific,or   educational]purposes.   Tenn.CodeAnn.675212(a)(3)(B).    Thisexemptionandtheliberalinterpretationappliedtotaxexemptstatutesarebasedupon X  the benefitconferredonthepublicbysuchinstitutions,andaconsequentrelief,tosomeextent,of D! theburdenuponthestatetocareforandadvancetheinterestsofitsowncitizens._LaManna_Ԁv.Elec. 0"  WorkersLocalUnionNo.474,518S.W.2d348,352(Tenn.1974)(quotingBookAgentsof #l! MethodistEpiscopalChurch,Southv.StateBd.ofEqualization,513S.W.2d514,521(Tenn.  1974)).  #XXXX#XXXX  Thus,itisclearthatthebargainmadewiththegovernment,thetaxpayers,andthepublicin t returnforbenefitssuchastaxexemptionisthattheorganizationwillbeoperatedforthepublicgood ` andnottoenrichthoseinvolvedinrunningit.#XXXX#XXXX L    EvenbeforetheadoptionoftheRevisedModelNonprofitCorporationAct,ithaslongbeen $ t thelawinTennesseethatnonprofitcorporationsarerequiredtooperateforpublicpurposesandnot  ` forindividualprivategain.See,e.g.,HighlanderFolkSch.v.Stateexrel.Sloan,208Tenn.234,  L  240,345S.W.2d667,669(1961)(holdingthattheoperationofaschoolforthepersonalgainofthe  8  individualwhocontrolledthefinancesandtowhomtheschoolsrealpropertywasgivenwas a $  misuseandabuseofitspowers,andperversiveoftheobjectsforwhichitwascreatedandinjurious   tothepublic).   #XXXXQ#XXXX  Adherencetothefundamentalcharacterofanonprofitcorporationisintendedtobeinsured,   inpart,bythefiduciarydutiesimposedonofficersanddirectorsofsuchcorporations.Itiswell p establishedthatofficersanddirectorsofaforprofitcorporationoweafiduciarydutytothe \ corporationanditsmembersorshareholders.FoundersLifeCorp.v.Hampton,597S.W.2d897, H 899(Tenn.1980);Johnsv.Caldwell,601S.W.2d37,41(Tenn.Ct.App.1980).Directorsand 4 officersofcorporationsareboundtotheexerciseoftheutmostgoodfaith,loyalty,andhonesty  p towardthecorporation.KnoxTennRentalCo.v.JenkinsIns.,Inc.,755S.W.2d33,36(Tenn.1988);  \ Hayesv.SchweikartsUpholsteringCo.,55Tenn.App.442,466,402S.W.2d472,483(1965). H  [T]hedirectorsofacorporationhavetoseetoitthatthecorporationhadthebenefitoftheirbest 4 judgmentandactsolelyandalwayswithreasonablecareingoodfaithtopromoteitswelfare.   Neesev.Brown,218Tenn.686,700,405S.W.2d577,584(1964).#XXXX#XXXX     Directorsandofficersofnonprofitcorporationsalsooweafiduciarydutytothecorporation.  StateexrelOliverv.SocyforPres.ofCommonPrayer,693S.W.2d340,343(Tenn.1985)#XXXX#XXXX.There  aretwobasicfiduciaryduties:thedutyofcareandthedutyofloyalty.Theyareembodiedinthe l RevisedModelNonprofitCorporationAct #  20      ׀andhavebeenenactedinTennessee: X  8  (a)Adirectorshalldischargealldutiesasadirector,includingdutiesasamember 0"  ofacommittee:#l!   8  (1)Ingoodfaith;$D #   8  (2)Withthecareanordinarilyprudentpersoninalikepositionwouldexerciseunder %0!$ similarcircumstances;and&"%   8  (3)Inamannerthedirectorreasonablybelievestobeinthebestinterestsofthe  corporation.   Tenn.CodeAnn.4858301.Acorporateofficerwithdiscretionaryauthorityissubjecttothesame t standards.Tenn.CodeAnn.4858403. `   Thesestatutorystandardsofconductfordirectorsandofficersofnonprofitcorporationsare 8  similartothosefortheircounterpartsinforprofitcorporations.u #  21      ׀However,becausethemissions $ t ofthetwotypesofcorporationsaredifferent,thedutyofloyaltyisdefinedsomewhatdifferently.  ` Theofficersanddirectorsofaforprofitcorporationaretobeguidedbytheirdutytomaximizelong  L  termprofitforthebenefitofthecorporationandtheshareholders. #  22      ׀Anonprofitpublicbenefit  8  corporationsreasonforexistence,however,isnottogenerateaprofit.Thus,adirectorsdutyof $  loyaltyliesinpursuingorensuringpursuitofthecharitablepurposeorpublicbenefitwhichisthe   missionofthecorporation.     Thecentralpurposeoffiduciarydutiesofofficersanddirectorsofnonprofitcorporations   istoensurethatacorporationsresourcesareusedtoachievethecorporationspurposesandnotto p enrichthedirectors.DevelopmentsintheLawNonprofitCorporations,supra,#XXXX4#XXXXat1601.In \ particular,thedutyofloyaltyrequiresthatadirectororofficerfaithfullypursuetheinterestofthe H organization,anditsnonprofitpurpose,ratherthanhisorherownfinancialorotherinterests,or 4 thoseofanotherpersonororganization.HarveyJ.Goldschmid,TheFiduciaryDutiesofNonprofit  p DirectorsandOfficers:Paradoxes,Problems,andProposedReforms,23IowaJ.Corp.L.631,641  \ (1998).#XXXXH#XXXXԀThus,nonprofitdirectorsandofficersmustbe principallyconcernedabouttheeffective H performanceofthenonprofitsmission.Id.#XXXX#XXXXAlthoughprinciplesoflawgoverningforprofit 4 corporationsgenerallygoverntheactivitiesofanonprofitcorporation,thosewhocontrolanonprofit   corporation haveaspecialdutytoadvanceitscharitablegoalsandprotectitsassets.Oberlyv.   Kirby,592A.2d445,47273(Del.1991).    #XXXX#XXXX  Inadditiontothedutiesofcareandloyalty,oraspartofthem,certaintransactions,called  conflictofinteresttransactions,betweenthecorporationandadirectororofficeraresubjecttoclose  scrutiny. [C]loseinvestigationisaccordedacorporationstransactionswithanofficerordirector,  andtheburdenofproofisplacedupontheofficerordirectorbecauseofhisfiduciarycapacity. t Johns,601S.W.2dat41(citingIntertherm,Inc.v.OlympicHomesSys.,569S.W.2d467,471(Tenn. ` Ct.App.1978)).Atcommonlaw,anabsoluteprohibitionexistedagainstcontractsbetween L  corporationswithcommondirectors,butthatprohibitionhasbeenmodifiedbystatute.Tenn. 8  DressedBeefCo.v.Hall,519S.W.2d805,807(Tenn.Ct.App.1974). $ t   Aconflictofinteresttransactionisstatutorilydefinedas atransactionwiththecorporation  L  inwhichadirectororofficerofthecorporationhasadirectorindirectinterest.Tenn.CodeAnn.  8  4858302#XXXXe#XXXX(a).Adirectororofficerhassuchaninterestif,butnotonlyif, anotherentityinwhich $  thedirectororofficerhasamaterialinterest...isapartytothetransactionor anotherentityof   whichthedirectororofficerisadirector,officer,ortrusteeisapartytothetransaction.Tenn.Code   Ann.4858302(c).     UndertheRevisedModelNonprofitCorporationAct,anyconflictofinteresttransactionis p voidablebythecorporation,andmaybethebasisforliabilityofadirectororofficer,unlessthe \ transactionwasfairatthetimeitwasenteredintoorisapprovedinaccordancewithstatutory H provisions.Tenn.CodeAnn.4858302(a).Aconflictofinteresttransactionmaybeapproved 4 if:  p 8  (1)Thematerialfactsofthetransactionandthedirectorsorofficersinterestwere H disclosedorknowntotheboardofdirectorsoracommitteeconsistingentirelyof 4 membersoftheboardofdirectorsandtheboardofdirectorsorsuchcommittee   authorized,approved,orratifiedthetransaction;    8  (2)Thematerialfactsofthetransactionandthedirectorsorofficersinterestwere  disclosedorknowntothemembersandtheyauthorized,approved,orratifiedthe  transaction;or   8  (3)Approvalisobtainedfrom:l   8  (A)Theattorneygeneralandreporter;orX    8  (B)Acourtofrecordhavingequityjurisdictioninanactioninwhichtheattorney D! generalandreporterisjoinedasaparty.0"    Tenn.CodeAnn.4858302(b).e #  23      ׀Anyapprovalbytheboardrequirestheaffirmativevoteofa $X" majorityofthedirectorswhohavenodirectorindirectinterestinthetransaction,butnosuch $D # transactionmaybeapprovedbyasinglememberoftheboard.Tenn.CodeAnn.4858303(d). %0!$  &"%   Approvalmeetingthestatutoryrequirements,however,simplyremovesthevoidabilityofthe  transactionbythecorporation,orpersonalliabilityfordirectorsandofficers.Inaddition,directors  consideringsuchapprovalmustcomplywiththeirfiduciarydutiesindecidingwhethertoapprove.t #  24      ׀  Suchapprovaldoesnotobviatethe_requirements_Ԁofnondistributiontocorporateinsidersanduseof t assetsforpublicbenefitpurposes. ` Ѐ#XXXXx#XXXX L    Wherecorporateofficersanddirectorsdonot,contrarytotheirfiduciaryduties,advancethe 8  corporationscharitablegoals,protectitsassets,and#XXXX#XXXXensurethatitsresourcesareusedtoachievethe $ t corporationspurposesandnottoenrichthosewhocontrolthecorporation,otherremediesexist.  ` Tenn.CodeAnn.4864301(a)(2)authorizesdissolutionofanonprofitcorporationinaproceeding  L  broughtbyaspecifiednumberorpercentageofvotingmembersuponproofofoneofseveral  8  grounds,includingwhere thecorporateassetsarebeingmisappliedorwastedorwhere the $  directorsorthoseincontrolofthecorporationhaveacted,areacting,orwillactinamannerthatis   illegal,oppressive,orfraudulent.Tenn.CodeAnn.4864302(a)#XXXX#XXXX(2)(B)&(D).     EvenbeforetheadoptionoftheRevisedModelNonprofitCorporationAct,#XXXX #XXXXTennessee   recognizedtherightofmembersofanonprofitcorporationtobringtheequivalentofashareholder p derivativeactionagainstthedirectorsandofficersforwastingcorporateassetsandusingcorporate \ assetsforpersonalgain.Bournev.Williams,633S.W.2d469(Tenn.Ct.App.1981).TheBourne H courtfoundthatTennesseehadlongrecognizedtherightofaggrievedshareholderstosueforthe 4 benefitofthecorporationtorectifyawrongtothecorporationand thatmembersofnonprofit  p corporationshavethesamerightsinthisregardasstockholdersofcorporationsforprofit,citing  \ Knappv.SupremeCommandery,U.O.G.C.oftheWorld,121Tenn.212,118S.W.390(1908)and H Rangev.TennesseeBurleyTobaccoGrowersAssn,41Tenn.App.667,298S.W.2d545(1955), 4 ascaseswheresuchactionswerebroughtbuttherighttosueasmembersofanonprofitcorporation   wasnotdisputed.Bourne,633S.W.2dat471472.#XXXX#XXXXԀSeealsoHannewaldv.FairfieldCmtys.,Inc.,   651S.W.2d222,22526(relyingonBourne,theTennesseeCorporationAct,andTenn.R.Civ.P.  23.06tofindthatamemberofanonprofitcorporationcouldbringa derivativeactionforthe  benefitofthecorporation).    Thisright,however,isnoteffectivewhere,ashere,anonprofitcorporationhasnomembers. X  Consequently,statutoryauthorityhasbeengiventotheAttorneyGeneraltoactinthepublicgood D! inenforcingtherequirementsapplicabletononprofitcorporations,particularlypublicbenefit 0"  corporations.Stateex#XXXX#rel.AdventistHealthCareSys.v.NashvilleMemlHosp.,Inc.914S.W.2d #l! 903,907(Tenn.Ct.App.1995).TheTennesseestatutesmirrortheprovisionsoftheRevisedModel $X" NonprofitCorporationAct,andtheauthoritygiventhereintotheAttorneyGeneralwasdesignedto $D # protectthepublicinterestintheoperationofnonprofitpublicbenefitcorporations.XXXX %0!$   &"% 8  SincetheenactmentoftheStatuteofCharitableUsesinthesixteenthcentury,a   majordeviceforregulatingcharitieshasbeenthepoweroftheattorneygeneralto  regulateorinvestigatecharitabletrusts.Overtime,thispowerhasbeenrecognized  andappliedtononprofitcorporationsorganizedforcharitablepurposes.TheRevised t [ModelNonprofitCorporation]Acthasextendedthisconcepttoreachallnonprofit ` corporationsinvaryingdegrees.ThestateundertheRevisedActhaslimitedpower L  toregulatemutualbenefitandreligiouscorporations,butithasbroadpowerof 8  supervisionoverthepublicbenefitcorporation.Thisisoneofthefeaturesofthe $ t RevisedActthatisbothmostcriticizedandmostcomplimented.TheDrafting  ` Committee,however,acceptedsuchprovisionsontherationalethatpublicbenefit  L  corporations,whichusuallyhavenoparticipantswithasufficienteconomicinterest  8  toassureoversight,canonlybemadeaccountablefortheiruseofassetsifthereare $  broadpowersofregulationinastateofficer.Tothatend,theRevisedActprovides   standingtotheattorneygeneraltoprotectthepublicinterest.    Moody,supra,at26263.v #  25      ׀ThedraftersoftheRevisedModelActintendedthattheAttorney   Generaloftheincorporatingstatehavewidediscretionandbroadpowersinregulatingpublicbenefit p corporationstoensurethattheyoperateasnonprofits.Moody,supra,at262,265,266,and269. \   AnofficialcommenttotheRevisedActprovides: 4 8  Thefailuretosetforthanexplicitlimitationonanonprofitorganizationsactivities  \ [intermsoflimitingcorporatepurposes]doesnotmeanthatanenterprising H entrepreneurcanimproperlyandwithimpunityoperateinthenonprofitform.In 4 general,publicbenefitandreligiouscorporationscannotmakedistributionsto   membersorcontrollingpersons.Unreasonablecompensationcannotbepaidto   membersorcontrollingpersons.Inaddition,theattorneygeneralhasbroadpowers  toensurethatapublicbenefitcorporationisnotoperatingfortheprivatebenefitof  anyindividual.   RevisedModelNonprofitCorporationAct3.01cmt.(1987)(citationsomitted). X    D!   Thestatuteitself,Tenn.CodeAnn.4864301,establishesgroundsfordissolutionof   nonprofitcorporationsingeneral.Subsection(a)(1)appliestodissolutionactionsbroughtbythe  AttorneyGeneral,andsubsections(a)(1)(E)and(F)applyonlytopublicbenefitcorporations.There  canbenoquestionthatthelegislatureintendedtoprovideoversightofpublicbenefitcorporation t assetstoensuretheirproperuseandpreventtheirmisapplication. `   Thus,theAttorneyGeneral,actinginthepublicinterest,hasauthoritytoseekdissolution 8  ofanonprofitpublicbenefitcorporationwhichfailstodevoteitsassetstoapublic,ratherthana $ t private,interest.Wheresuchacorporationisoperatedfortheprivatebenefitofanindividualin  ` contraventionoftheprinciplesgoverningnonprofitstatusanditsaccompanyingbenefits,orwhere,  L  asthetrialcourtphrasedit,thecorporationhasabandoneditspublicbenefit,charitablepurpose,  8  actionbytheAttorneyGeneralandthecourtsiswarranted. $    IV.SummaryJudgment   9#XXXX#  Thestandardsforreviewingsummaryjudgmentsonappealarewellsettled.Summary   judgmentsareproperinvirtuallyanycivilcasethatcanberesolvedonthebasisoflegalissuesalone. p Frugev.Doe,952S.W.2d408,410(Tenn.1997);Byrdv.Hall,847S.W.2d208,210(Tenn.1993); \ Churchv.Perales,39S.W.3d149,156(Tenn.Ct.App.2000).Theyarenot,however,appropriate H whengenuinedisputesregardingmaterialfactsexist.Tenn.R.Civ.P.56.04.Thus,asummary 4 judgmentshouldbegrantedonlywhentheundisputedfacts,andtheinferencesreasonablydrawn  p fromtheundisputedfacts,supportoneconclusionthatthepartyseekingthesummaryjudgmentis  \ entitledtoajudgmentasamatteroflaw.Webberv.StateFarmMut.Auto.Ins.Co.,49S.W.3d265 H (Tenn.2001);Brownv.BirmanManagedCare,Inc.,42S.W.3d62,66(Tenn.2001);Goodloev. 4 State,36S.W.3d62,65(Tenn.2001).     Summaryjudgmentsenjoynopresumptionofcorrectnessonappeal.Scottv.Ashland  HealthcareCtr.,Inc.,49S.W.3d281(Tenn.2001);Penleyv.HondaMotorCo.,31S.W.3d181,183  (Tenn.2000).Accordingly,appellatecourtsmustmakeafreshdeterminationthattherequirements  ofTenn.R.Civ.P.56havebeensatisfied.Hunterv.Brown,955S.W.2d49,5051(Tenn.1997); l Masonv.Seaton,942S.W.2d470,472(Tenn.1997).Wemustconsidertheevidenceinthelight X  mostfavorabletothenonmovingparty,andwemustresolveallinferencesinthenonmoving D! party'sfavor.Doev.HCAHealthServs.,Inc.,46S.W.3d191,196(Tenn.2001);MemphisHous. 0"  Auth.v.Thompson,38S.W.3d504,507(Tenn.2001).Whenreviewingtheevidence,wemust #l! determinefirstwhetherfactualdisputesexist.Ifafactualdisputeexists,wemustthendetermine $X" whetherthefactismaterialtotheclaimordefenseuponwhichthesummaryjudgmentispredicated $D # andwhetherthedisputedfactcreatesagenuineissuefortrial.Byrdv.Hall,847S.W.2dat214; %0!$ Rutherfordv.PolarTankTrailer,Inc.,978S.W.2d102,104(Tenn.Ct.App.1998). &"%   XXXXApartyseekingsummaryjudgmenthastheburdenofdemonstratingthatitsmotionsatisfies (#' therequirementsofRule56,includingitsentitlementtojudgmentasamatteroflaw.Carvellv. )$( Bottoms,900S.W.2d23,25(Tenn.1995);Jonesv.CityofJohnsonCity,917S.W.2d687,689 |*%) (Tenn.Ct.App.1995).#XXXX#ԀWhenapartyseekingsummaryjudgmentmakesaproperlysupported h+&* motion,theburdenshiftstothenonmovingpartytosetforthspecificfactswhichmustberesolved  bythetrieroffact.Byrd,847S.W2dat215.  XXXX  Thiscourtsroleinreviewofthegrantofsummaryjudgmentistoreviewtherecordand t determinewhethertherequirementsofTenn.R.Civ.P.56havebeenmet.Staplesv.CBL&Assoc., ` 15S.W.3d83,88(Tenn.2000).Ourperspectiveisthesameasthatofthetrialcourt.Gonzalesv. L  AlmanConst.Co.,857S.W.2d42,4445(Tenn.Ct.App.1993)#XXXX#XXXX.Therefore,wemustdecideanew 8  ifthemovantisentitledtosummaryjudgment;thatis,whetherthematerialfactsarenotindispute $ t andconclusivelyshowthattheAttorneyGeneralisentitledtojudgment.#XXXX#XXXXԀ#XXXX#XXXXBecausesummaryjudgment  `  isclearlynotdesignedtoserveasasubstituteforthetrialofgenuineandmaterialfactualmatters,  L  Byrd,847S.W.2dat#XXXX #XXXX210,wemustfirstdeterminewhatfactsareundisputedandwhetherany  8  disputedfactsarematerialtodeterminationofthelegalissuesinvolved.#XXXX,# $    Thisdeterminationiscomplicatedinthecasebeforeusbecauseofthevolumeofdocuments   involvedandbecauseofgeneralobjectionsbythecorporationstoconsiderationofanumberof   documentsonthebasistheyarenotproperlyintherecord.XXXXԀThenatureoftheseobjectionswasset   outinresponsetotheAttorneyGeneralsstatementofundisputedfactsfiledpursuanttoTenn.R. p Civ.P.56.03. #  26      ׀#XXXXY#XXXXCCFSandCCNbegantheirResponseandObjectionstotheAttorneyGenerals \ StatementofUndisputedFactsbymakingageneralevidentiaryobjection.Thisobjectionstated,in H pertinentpart: 4 8  ThisobjectionaddresseswhathasbecomeapracticeofthePlaintiff[Attorney  \ General]whichisatoddswiththeTennesseeRulesofEvidenceandTennessee H precedent.OnoraboutFebruary23,2001,PlaintiffsubmitteditsThirdNoticeof 4 Filingreferencingthefilingofnineteen(19)exhibitsidentifiedbyvolumeand   exhibitnumber.TheseexhibitsweremerelyattachedtotheThirdNoticewithno   attempttoauthenticateorotherwiselayafoundationfortheiradmissibilityanduse.  Thereafter,uponapplicationforsummaryjudgmentandinitsStatementof  UndisputedFacts,however,PlaintiffcitestoitsThirdNoticeofFilingover120times  asifthedocumentscontainedthereinwereproperlybeforethisCourt.Cherokee  objectstothisnakedfilinganduse,asmanyofthesedocumentsareinadmissibleon  thegroundsthatthePlaintiffhasfailedtoproperlyauthenticatethedocumentsand t astheyalsocontaininadmissiblehearsay.`     CCFSandCCNarguedthatbecausetheobjectionableexhibitswereunauthenticated,the 8  exhibitswerenotproperlyapartoftherecordbeforethecourtandcouldnotbeconsideredona $ t motionforsummaryjudgment. #  27      ׀Theresponsealsoincludedalistofsomespecificexhibits  ` submittedwiththefirstNoticeofFilingwhichthecorporationsassertedshouldbeinadmissiblefor  L  useindecidingsummaryjudgment.Inaddition,insomeofthenumberedresponses,the  8  corporationspointedoutthespecificdocumentbeingchallengedandthebasisforthechallenge. $    TheAttorneyGeneralfiledareplytoCCFSsandCCNsresponseandasserted,with   referencetovariousspecificresponses,thatthecorporationshadnotcompliedwithTenn.R.Civ.   P.56.03bynotmakingspecificcitationstotherecord;thatthedefendantshadpreviouslyadmitted   somefactsintheirverifiedanswers;andthat extraneousstatementsmadebyDefendantsare p immaterial.Inaddition,theAttorneyGeneraladdressedsomeoftheevidentiarydeficiencies \ allegedbythecorporations.#XXXX #XXXX H   Onappeal,CCFSandCCNhaveagainraisedtheirobjectionto numerousvolumesof  p unauthenticateddocumentsandrecords,allegingthat [s]omeofthesedocumentsandfilingsfailed  \ tomeeteventhemostbasicevidentiaryrulesandto numerousaffidavitstheyallegewerenot H basedonpersonalknowledgeandcontainedhearsayandotherinadmissibleevidence. #  28      ׀Theyalso 4 arguethatbecausethetrialcourtneverruledontheirmotionstostrikethesefilingsandbecausethe   courtdidnotdetailitsfindings,CCFSisunsurewhetherthetrialcourtreliedonthisinadmissible   evidence.Ifitdidsorely,theyassert,suchreliancewaserror.#XXXX)#XXXX    Inconnectionwithhismotionforsummaryjudgment,theAttorneyGeneralfiledaTenn.R.  Civ.P.56.03statementcontainingsomeeightythree(83)undisputedfacts.Approximatelyhalfof l thosewereundisputedbythecorporations.CCFSandCNNalsosubmittedastatementof X  undisputedfactsinsupportoftheirmotionforsummaryjudgment.Wehavepainstakinglyreviewed D! thesestatements,theobjectionsandresponses,thedepositions,affidavitsanddocumentsorrecords  filedherein,aswellasthepleadings,briefsandotherfilings.Inourreview,wehaveresolvedthe  questionsofadmissibility,wherenecessary,whereraised,andwhereidentifiable,accordingtothe  followinggeneralprinciples.Seegenerally10AWright,Miller&Kane,FederalPractice t andProcedure:Civil2722(3ded.1998).#XXXX#XXXX `   Aspartofthemovingpartysburden,itmustpresentfactswhich,ifundisputed,demonstrate 8  itsentitlementtojudgmentasamatteroflaw.#XXXXJ#XXXXTypically,themovingpartypresentsfactstothecourt $ t intheformofaffidavits,authenticateddocuments,depositions,andotherproperly-verifiedfactual  ` mattersdevelopedthroughthediscoveryprocess.Pleadings,depositions,answerstointerrogatories,  L  admissionsonfile,andaffidavitsarespecificallyallowedtobeconsideredinthedeterminationof  8  whetheragenuineissueofmaterialfactexistsandwhetherthemovingpartyisentitledtojudgment. $  Tenn.R.Civ.P.56.04.Theprofferedsworn-totestimonyand/orproperly-authenticateddocuments   mustbeadmissibleattrialbeforetheycanbeconsideredbythetrialcourtonsummaryjudgment.   Byrd,847S.W.2dat215#XXXXT#XXXX.   8        Themeresubmissionofastatementofundisputedmaterialfactsbythemovingpartydoes p not,inofitself,constituteproofofthefactstherein.However,whentheopposingpartyagreesthat \ afactisnotdisputedpursuanttoTenn.R.Civ.P.56.03,thecourtmayrelyuponthatadmissionin H determiningwhetheragenuineissueofmaterialfactexists.Apartysswornpleadingbasedupon 4 personalknowledgecanconstituteanadmission.Similarly,admissionsinthebriefoftheparty  p opposingthemotionmaybeusedindeterminingthatthereisnogenuineissueastoanymaterial  \ fact.#XXXX!#XXXX H   Documentsmustgenerallybeauthenticatedbyandattachedtoanaffidavitordepositionthat   meetstherequirementsofRule56.Judicial,legislative,oradministrativerecordsmusteitherbe   certifiedorproperlysubjecttothejudicialnoticedoctrine.#XXXX$%#XXXXԀBusinessrecordsareadmissibleif  accompaniedbyaffidavitorcertificatefromtherecordscustodian.Somerecordsareself  authenticatingpursuanttotheTennesseeRulesofEvidence.#XXXX&#XXXXԀUncertifiedorotherwiseinadmissible  materialmaybeconsideredifnotchallenged,andtheobjectionmustbetimelyoritwillbede