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Williams Township Board of Supervisors v. Williams Township Emergency Company

December 11, 2009


The opinion of the court was delivered by: Senior Judge McCLOSKEY

Argued: November 5, 2009



The Williams Township Emergency Company (WTEC) appeals from an order of the Court of Common Pleas of Northampton County (trial court) that (1) denied the application of the Township of Williams (Township) and the Williams Township Board of Supervisors for permanent injunctive relief; (2) granted WTEC's petition for transfer of its assets; and (3) granted WTEC's motion to vacate the preliminary injunction the trial court had initially ordered in favor of the Township. Additionally, and pertinent to WTEC's appeal, the trial court created a constructive trust of improved property owned by WTEC, known as the Raubsville Road Property, that designated WTEC and its assigns or heirs as trustee and the Township as beneficiary. We now affirm in part and reverse in part.

WTEC was incorporated as a nonprofit corporation with the purpose of providing emergency ambulance service in the Township. WTEC has been providing such service, as well as basic life support services, for forty years. The Easton Emergency Squad (EES) has provided the Township with advanced life support. The two emergency companies have cooperated over the years, in part because of geographical proximity. Although WTEC has remained fiscally sound despite a decrease in volunteers, maintaining the company as independent has become inefficient because of the relatively low annual call volume, only between 230 to 250 billable ambulance transports, and difficulty maintaining adequate staff.

In 2006, WTEC and EES began merger discussions and ultimately agreed to merge. WTEC met with the Board of Supervisors, who initially endorsed the merger and who, on or about April 11, 2007, designated EES as the primary ambulance service provider for the Township. However, on May 24, 2007, the Township and its Board of Supervisors (collectively hereafter referred to as the Township) filed a complaint with the trial court seeking injunctive relief. At the same time, the Township filed a motion for a preliminary injunction, seeking to maintain the status quo.

In its complaint, the Township averred that WTEC was the owner of various real and personal property and that the Township had contributed $126,245.00 of taxpayer money to WTEC over the period from 2003 to 2006, with $45,000.00 budgeted, but not paid, to WTEC for 2007. The Township also asserted that, following WTEC's notice of its intent to merge with EES as of July 1, 2007, the Township sought detailed information from WTEC and EES, including a list of voting squad membership, copies of current by-laws, copies of all paperwork filed with EES' Medical Service Council, a written plan of intended emergency medical service coverage following the merger and a complete audit of WTEC's finances and any other pertinent accounts over the preceding three-year period by a certified public accountant (CPA).

The Township indicated that EES failed to provide the requested information and that, as of the time of the filing of the complaint, WTEC had only partially complied. The Township averred that WTEC had a fiduciary responsibility to the Township's residents and that they had a beneficial interest in WTEC's assets. The Township referred to WTEC's by-laws, which provided that if WTEC should close, WTEC would tender all property and monies to the Board of Supervisors. Hence, the Township sought an injunction that would freeze any and all assets of WTEC which are not necessary to its daily operation as the primary provider of emergency ambulance service in the Township. The Township also sought an order directing that a CPA of its selection be hired to perform a three-year audit of all assets, liabilities and financial records of WTEC, and directing WTEC to file a detailed inventory of all assets with the Prothonotary of the trial court.

By order dated May 31, 2007, the trial court granted the Township's motion for a preliminary injunction, which (1) directed WTEC to allow a CPA to perform a three-year audit, (2) directed the CPA to assist WTEC with an inventory of all assets, which was to be filed with the Prothonotary, and (3) froze all of WTEC's assets, with the exception of those necessary for WTEC's daily operation.*fn1 WTEC and EES thereafter complied with the trial court's order. The Township hired Robert J. Davidson, CPA, to conduct the audit. A second audit was conducted by J.R. Henry Consulting, Inc., who was hired by EES. Mr. Davidson issued a report essentially concluding that WTEC had a clean bill of financial health. J.R. Henry Consulting, Inc., issued a similar report and specifically endorsed the merger plans.

WTEC subsequently filed an answer with new matter alleging that the Township's claims were barred by the doctrines of consent and estoppel, as the Board of Supervisors had already approved its merger plans. WTEC noted that, under the merger plans, it would not close, but instead would maintain an ongoing presence with emergency ambulance service being provided from the same location on Raubsville Road in the Township.*fn2 On the same day that WTEC filed its answer to the Township's complaint, it also sought an order declaring that the merger will not result in its closing, as well as approval of a petition to transfer assets.

WTEC asserted in its transfer petition that, in accordance with its merger plans, WTEC would merge into a new EES. WTEC reiterated that it would continue to provide emergency ambulance service from the Raubsville Road location in the Township and that said location was not closing. WTEC noted that the Board of Directors of the newly-merged EES would consist of two members from WTEC and three members from the original EES.*fn3 WTEC sought an order (1) dismissing the existing preliminary injunction that had frozen its assets; (2) approving the merger plan; and (3) approving the transfer of assets. The Township filed an answer requesting that WTEC's petition be denied.

The trial court held a non-jury trial on August 21, 2008. On that same date, the parties reached an agreement permitting transfer of all of WTEC's property to the newly-merged EES, with the exception of the Raubsville Road property. In fact, the heart of the Township's claim before the trial court related solely to the Raubsville Road property, and the Township based its claims primarily on a provision of WTEC's by-laws that provides that WTEC will turn over its assets to the Township in the event that WTEC "closes."

The trial court made various factual findings relating to WTEC's acquisition and payment for the Raubsville Road property. The trial court found that the Township had contributed approximately $120,000.00 to WTEC between 1990 and 2006, excluding insurance and gas, and that the Township discontinued contributions in 2006.

With regard to WTEC's acquisition of the Raubsville Road property, the trial court determined that WTEC acquired the property "through private donations made by citizens of Williams Township, and through a bequest from a private testator." (Trial Court Opinion, Finding of Fact No. 4). Additionally, the trial court found that the Township did not begin to make "relatively regular annual contributions to [WTEC] until after [WTEC] had satisfied the mortgage on the Raubsville Road property." (Trial Court Opinion, Finding of Fact No. 7). The trial court then noted Section 4 of the by-laws, which states that: "[s]hould this organization close, all property and monies will be given to the Board of Supervisors of Williams Township." In seeking to analyze the question of whether the merger would constitute the "closing" of WTEC, the trial court rendered factual findings regarding the nature of the merger. In summary, the trial court found that the merged organization would be operated under the name Easton Emergency Squad, Inc., based upon the fact that (1) EES had the license for advanced life support services and other practical reasons, (2) the merger would result in EES absorbing all of WTEC's current members and all of WTEC's assets, and (3) the new operation would continue to use the Raubsville Road property in order to provide the Township with needed services. Additionally, the trial court determined that two members of WTEC would serve as board members on the new organization.

The trial court further observed that, because of declining membership, WTEC had problems obtaining a quorum in order to conduct business, but that, at a meeting on August 16, 2008, WTEC amended its by-laws, specifically Section 4, to state as follows: "[s]hould this organization close, all property and monies will be given to a similar nonprofit organization of our choice."

The trial court agreed with WTEC that the merger did not constitute a "closing" as envisioned in the original version of Section 4 of the by-laws, and, hence, the trial court did not address the question of whether WTEC had the power to amend Section 4 to delete the provision directing transfer of property to the Township if it "closed."

In reaching this conclusion, the trial court first referred to Section 5921 of the Nonprofit Corporation Law of 1988 (the Law), 15 Pa. C.S. ยง5921, which ...

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