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In Re: First Baptist Church of

June 10, 2011

IN RE: FIRST BAPTIST CHURCH OF SPRING MILL APPEAL OF: FIRST BAPTIST CHURCH OF SPRING MILL


The opinion of the court was delivered by: Bonnie Brigance Leadbetter, President Judge

: Argued: February 7, 2011

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge HONORABLE BERNARD L. McGINLEY, Judge HONORABLE JAMES R. KELLEY, Senior Judge

OPINION BY PRESIDENT JUDGE LEADBETTER

First Baptist Church of Spring Mill (Church), a nonprofit corporation located at 80 Cedar Grove Road, Conshohocken, Pennsylvania, appeals from the order of the Court of Common Pleas of Montgomery County, Orphans' Court Division that, inter alia, disapproved the proposed payment of the substantial portion of proceeds of the sale of its property to its pastor, David M. Clinger (Rev. Clinger). The Church sold the property under its plan to dissolve itself pursuant to the Nonprofit Corporation Law of 1988 (Nonprofit Corporation Law), 15 Pa. C.S. §§ 5101 - 6145. We quash the Church's appeal as taken from a non-appealable interlocutory order.

The Church, established in 1902, has been operated as an independent church. On April 21, 2009, the Church filed a petition titled, "Petition for the Approval of Employee Compensation and the Distribution of the Assets of a Nonprofit Corporation, Pursuant to 15 P[a.] C.S.[ ] [§§] 5976(b), 5976(c) and 5547(b) in Anticipation of Dissolution and Distribution of Assets to 501(c)(3) Entities." The Church alleged that it had adopted a plan to dissolve itself due to decreased membership and financial difficulties and that it had sold its real property and received a net amount of $691,506.46. The Church proposed to distribute the proceeds of the sale as follows: $635,000 to Rev. Clinger for his service for the past ten years; $1035 to Kenneth A. Berg, Ph.D. for his maintenance work ($30 an hour); $8400 to Dr. Berg's wife, Shelley Berg, for her service as a music director ($20 an hour); and the remaining proceeds to nonprofit entities and individuals. The Church averred that it "owe[d] its pastor and other employees compensation for periods of time when they were uncompensated due to the church's financial struggles." Petition, ¶ 7; Certified Record, Item No. 16.

In an answer and new matter filed as parens patriae through the Attorney General, the Commonwealth objected to the petition. It alleged that the Church failed to seek the court's approval of the sale of its assets, and that by voting to approve the compensation package, Rev. Clinger and the other board members of the Church violated a fiduciary duty imposed by Section 5712(a) of the Nonprofit Corporation Law, 15 Pa. C.S. § 5712(a), and engaged in self-dealing to inure benefits to private individuals. The parties agreed that a separate hearing would be held on the distribution of the Church's remaining assets to the nonprofit entities and individuals. At the beginning of the hearing held on March 3, 2010 on the proposed compensation package, the Commonwealth advised the trial court of its decision not to object to the proposed payment to Dr. Berg and his wife. The parties presented the following evidence at the hearing.

In 1999, Rev. Clinger became the Church's permanent pastor at a starting weekly salary of $150, out of which $90 was treated as a non-taxable housing allowance. He subsequently received periodic salary increases and, eventually, his entire salary was treated as a housing allowance. He was also paid separately for his maintenance work. As of 2008, his annual salary was $17,930. There was no written employment agreement between the Church and Rev. Clinger. Since he graduated from the seminary in 1987, he has also worked fulltime first for Hechinger's and then for Home Depot. As of the hearing, he was earning $19.40 an hour from Home Depot.

Dr. Berg, who had known Rev. Clinger since 1985, joined the Church in 2003 and became a member of the Church's board. At the informal board discussion in January 2006, Rev. Clinger, his wife, Lynn Clinger, and Dr. Berg "agreed that [Rev. Clinger] should be compensated in the form of Back pay & some type of retirement benefits in the event the church dissolves." Reproduced Record (R.R.) at 17a. In March 2007, thirteen members of the Church's congregation unanimously approved the revision to the Church's 1998 constitution, as proposed by Rev. Clinger. Article XII, Section 4.C of the constitution was revised to provide that "[i]n the event of the dissolution of this corporation, all of its debts shall be fully Satisfied, including any compensation and benefits due to its Pastor." R.R. at 186a (emphasis added). Article VII, Section 8 was also revised to include the pastor as a member of the Church's board. In addition, the pastor was no longer required to withdraw from a business session when he was the subject of the discussion. Article VII, Section 2.F. Rev. Clinger's nomination of his son, John Clinger, to a trustee position of the Church was also approved.

At the March 2008 annual congregational meeting, eight voting members of the Church, including Rev. Clinger, his wife, his two sons, Dr. Berg and Dr. Berg's wife, voted to sell the Church's real property. They also adopted a motion of Rev. Clinger's son, Jared Clinger, to "compensate" Rev. Clinger for his past service after the sale of the Church's property. R.R. at 22a. The committee formed to determine the amount of compensation for Rev. Clinger proposed to pay him up to $635,000. Between 1999 and 2008, the Church's annual income ranged from $26,474 to less than $35,000.

On July 20, 2008, Rev. Clinger, his wife and his son signed an agreement to sell the Church's real property to Disciple Community Church of Philadelphia for $750,000. A week later, six remaining voting members, the four Clingers and the Bergs, unanimously voted to dissolve the Church and approved the compensation package for Rev. Clinger and the Bergs. After receiving a net amount of $691,506.46 from the sale of the real property on March 27, 2009, the Church filed the instant petition seeking approval of, inter alia, the proposed payment of $635,000 to Rev. Clinger. The Church's vocational expert, Donald E. Jennings, Ed.D., stated in his report that the annual salary and benefits for a fulltime pastor in the Philadelphia area with a nine-year experience at a church with fewer than 100 members ranged from $38,726 to $46,739.

The trial court phrased the issue to be decided as "whether the claim for compensation by David Clinger is a legal debt of the church." Trial Court's April 26, 2010 Opinion at 12. The court concluded that Rev. Clinger's claim for compensation for his past service would be unenforceable under contract law requiring a contract to be supported by a legal consideration to be valid. The court determined that a payment of additional sums to Rev. Clinger would constitute a gift, which would be inconsistent with the charitable purposes of the Church. The trial court authorized the Church's board to pay $1035 to Dr. Berg, $8400 to Dr. Berg's wife and $22,500 to Rev. Clinger to cover the costs of storing the Church's records for ten years. The court also authorized the board to pay legal fees and witness fees. The Church's appeal to this Court followed.

The Church argues that the proposed payment to Rev. Clinger is consistent with its charitable purposes. The Church asserts that its members desired to compensate Rev. Clinger appropriately and that the Church's constitution also expresses a desire to compensate him adequately. The Church also cites the provision of its revised constitution requiring payment of all debts, including any compensation and benefits owed to the pastor, upon dissolution.

Before addressing the merits of the Church's appeal, we will consider the Commonwealth's argument that the appeal should be quashed as an appeal from a non-appealable interlocutory order. The Commonwealth submits that the Church filed the petition in anticipation of the distribution of assets and its dissolution and that the court's order addressing only the compensation issue is not an appealable final order. The Church responds that it only sought the court's approval of the proposed compensation package in the petition and that the court's supervision over a final distribution of the Church's assets and its dissolution "is merely administrative housekeeping[ ] and does not constitute an outstanding claim that is undecided." Church's Reply Brief at 5. The appealability of the trial court's order is a question of law subject to our plenary review. Commonwealth v. Auto Mart, Inc., 910 A.2d 171 (Pa. Cmwlth. 2006).

An appellate court's jurisdiction generally extends only to review a final order. Pa. R.A.P. 341(a); Northumberland County Children & Youth Servs. v. Dep't of Pub. Welfare, 2 A.3d 794 (Pa. Cmwlth. 2010). A final order is any order which (1) disposes of all claims and of all parties, (2) is expressly defined as a final order by statute, or (3) is certified as a final order pursuant to Pa. R.A.P. 341(c). Pa. R.A.P. 341(b). The purpose of limiting ...


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