Appeal from order of Court of Common Pleas, Trial Division, of Philadelphia, June T., 1930, No. 10005, in re Amendment to Articles of Incorporation of the Defender Association of Philadelphia; appeal of Bernard L. Segal and Louis B. Schwartz, members of the Association.
Louis B. Schwartz, with him Bernard L. Segal and Dennis Eisman, for appellants.
Edward W. Madeira, Jr., with him Vincent J. Ziccardi, for Defender Association of Philadelphia, appellee.
Judah I. Labovitz, Thomas Gilhool and Thomas B. Harvey, Jr., for American Civil Liberties Union, intervenor.
Wright, P. J., Watkins, Montgomery, Jacobs, Hoffman, Spaulding, and Cercone, JJ. Dissenting Opinion by Spaulding, J. Hoffman, J., joins in this dissenting opinion.
[ 219 Pa. Super. Page 310]
Dissenting Opinion by Spaulding, J.:
Appellants, members of the Defender Association of Philadelphia, and previous members of its Board, challenge the approval of certain amendments to the Association's charter by the Court of Common Pleas of Philadelphia.
The Defender Association of Philadelphia traditionally has been a "private" group engaged in the defense of indigents accused of crimes. Prior to March 1969, the Association had been operated by a fifty-man Board of Directors elected by the dues-paying membership. Its financing came from various sources, including the United Fund of Philadelphia. When Gideon v. Wainwright, 372 U.S. 335 (1963), established that local governments were constitutionally required to provide funds for the defense of indigents accused of crime, the City began to supplement the Association's income.
[ 219 Pa. Super. Page 311]
When it became apparent, in January 1969, that a contribution of $1,250,000 would be necessary, the City Administration determined that it would assume control of the Defender operation. However, a proposed ordinance (Bill 830) establishing a public defender office, with the Defender to be appointed by the Mayor, caused considerable public indignation. As a compromise, the Association-City contract was reached. Under this contract, the City would not create a new organization, but would provide the necessary operational funds for the Defender Association, which, in return, would amend its charter to restructure the Board of Directors: ten directors would be chosen by the City, ten by the Association, and ten by the combined group of twenty.
The Association's existing Board approved this an arrangement by a 19-16 vote. On March 28, 1969, the Association (proponents) submitted to the Court of Common Pleas a series of amendments which made the following changes: (1) a phrase permitting reference of clients by charitable organizations was deleted (art. II); (2) the change in the structure of the Board of Directors was added (art. VII); (3) the article limiting yearly income receivable was deleted (art. XI). Objections were filed by appellants (objectors). Judge John J. McDevitt, III, held a hearing and approved the amendments in an "adjudication" filed on August 8, 1969.
The petition to amend the Association's charter was brought pursuant to the Pennsylvania Nonprofit Corporation Act, 15 P.S. 7707, which provides that the court shall approve charter amendments if they are "lawful" . . . beneficial and not injurious to the community". The lower court, after a lengthy summary of the respective arguments, stated that "[it] cannot accept
[ 219 Pa. Super. Page 312]
the arguments that the revised Charter would create a corporate monster outside the contemplation of the Nonprofit Corporation Law which is clearly unlawful, not beneficial and would be injurious to the community. . . ." The court concluded by saying: "We do not decide the problem before the Court on the basis that the contract with the City requiring an amendment of Articles of Incorporation represent [sic] the better choice of two evils. Actually in our opinion the Defender Association service to the community will be more beneficial than in the past. Believing that the Board of Directors will be 'independent' the Association will now be adequately financed and in a position to meet the increasing demand for legal representation as required by the Constitution and court decisions." (Emphasis added.)
Section 7707 of the Nonprofit Corporation Act states a requirement for a positive finding that amendments be "beneficial", as well as the determination that they are "not injurious". This wording does not indicate a balancing of benefits and detriments but required a finding of positive benefit. The term "beneficial" does not appear in the analogous provision for amending a corporation charter under the Business Corporation Law. 15 P.S. §§ 1801-1810. The Legislature evidently intended that in the case of nonprofit corporations, the charter should not be amended unless the amendment improved the organization's service to the community. At the very least, the term must require a finding that the amendment is for the community good.*fn1
[ 219 Pa. Super. Page 313]
In my view, the findings of the court below do not meet the requirements of § 7707. Of the amendments, the court states only that they would not "create a corporate monster" which is "clearly unlawful" or "not beneficial" or "injurious to the community". It appears that what the court found beneficial was not the amendments themselves, but the total contractual arrange ment. It is undeniable that an increase in funds is beneficial to the Association, but that does not meet the question whether the structural change is in fact beneficial to the community. Since the merits of the contractual arrangement were beyond ...