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IN THE COMMONWEALTH COURT OF PENNSYLVANIA

In Re:

:

The Lord's New Church

:
Which is Nova Hierosolyma

:

:
Appeal of: Feodor Pitcairn,

:
Laren Pitcairn and

: No. 1199 C.D. 2002
Miriam Pitcairn Mitchell

: Argued: November 6, 2002

BEFORE: HONORABLE JAMES GARDNER COLINS, President Judge
HONORABLE
BERNARD
L. McGINLEY, Judge
HONORABLE
DORIS
A.
SMITH-RIBNER, Judge
HONORABLE
ROCHELLE S. FRIEDMAN, Judge
HONORABLE
BONNIE
BRIGANCE LEADBETTER, Judge
HONORABLE
RENÉE
L.
COHN,
Judge
HONORABLE
MARY
HANNAH LEAVITT, Judge

OPINION BY PRESIDENT JUDGE COLINS
FILED: February 4, 2003

Feodor Pitcairn, Laren Pitcairn and Miriam Pitcairn Mitchell
(Appellants) appeal from the order of the Orphans' Court Division of the
Court of Common Pleas of Montgomery County that denied the exceptions
they filed to a decree dismissing their petition seeking judicial review of
actions taken by four directors of the nonprofit corporation The Lord's New
Church Which is Nova Hierosolyma (the Corporation), Leonard Fox, Paul
Booth, Richard Rech and Edward Arrington (Appellees); the removal of
those directors; a new election; and the appointment of a temporary
custodian. We vacate the order, in part, and remand with instructions.

We affirm the trial court in major part in this matter as its opinion
relates to each of the issues raised except the question of the transfer of
certain funds by the Appellees from the Corporation to an organization
known as the International Council of Priests (ICP).

The Lord's New Church Which is Nova Hierosolyma is the name of a
non-profit corporation created in 1939 to promote and maintain a
Swedenborgian church founded by Theodore Pitcairn. The church itself is
unincorporated and consists of approximately 1,000 members in Bryn
Athyn, Pennsylvania, Kwa-Zulu Natal, South Africa and The Netherlands.1
This case arose from a reorganization of the church that was proposed in the
mid-1990s by Petitioner Feodor Pitcairn. The history of that reorganization
can best be described as convoluted, with each side accusing the other of
attempting to take over the Corporation and its assets for its own personal
gain. The struggle finally prompted the Appellant's filing, in July of 1999,
of a petition in Montgomery County's Orphans' Court alleging the existence
of a conspiracy on the part of the Appellees to take control of the
Corporation and its substantial assets. The petition asked for the review of
corporate action pursuant to Section 5793 of the Non-Profit Corporation
Law, 15 Pa. C.S. §§5101-6162 (the Law), the removal of directors pursuant
to Section 5726, and for the appointment of a custodian of the corporation
pursuant to Section 5764. The trial court entered an order preserving the
status quo before hearing the petition. After the hearing the trial court

1 The Church in Holland is supported by a separate fund under the control of two of the
Respondents, Booth and Rech.

2

dismissed the petition even though it acknowledged that the Appellees "had
employed some heavy-handed tactics" but that their actions had not "run
afoul of the Non-Profit Law so as to justify ... imposing the drastic remedy
of judicial supervision of the corporation's affairs." (Trial court opinion, p.
23) The Appellants filed exceptions, which were heard by an en banc panel
consisting of only two judges. The panel denied the exceptions but in a
dissenting opinion one of the judges argued that a special meeting of the
Corporation's membership should have been ordered. The other opined that
such a meeting would surely take place without the court's intervention once
the status quo order was lifted. This was the only disagreement between the
two. This appeal followed. The Appellants ask us to vacate the decree of
the trial court, direct the Corporation to hold a special meeting, order the
Appellees to return certain funds withdrawn from the Corporation, and direct
the trial court to take such other action as may be consistent with our
decision.

The question we consider is whether the actions of the Appellees
complained of by the Appellants are sufficient to trigger the intervention of
the Orphans' Court into the affairs of the Corporation.2

The petition in this matter was filed pursuant to the following
provisions of the Law:

§5726. Removal of directors

2 Our standard of review is to determine whether the trial court's findings are supported
by substantial evidence, whether an error of law was committed, or whether the trial court
abused its discretion. Kelso Woods Ass'n, Inc. v. Swanson, 692 A.2d 1132 (Pa. Cmwlth.
1997).

3

(c) By the court.--The court may, upon petition of any member
or director, remove from office any director in case of
fraudulent or dishonest acts, or gross abuse of authority or
discretion with reference to the corporation, or for any other
proper cause, and may bar from office any director so removed
for a period prescribed by the court. The corporation shall be
made a party to such action.

15 Pa. C.S. §5726(c)

§ 5764. Appointment of custodian of corporation on
deadlock or other cause

(a) General rule.--The court, upon application of any member,
may appoint one or more persons to be custodians of and for
any nonprofit corporation when it is made to appear:
...

(2) that any of the conditions specified in section 5981
(relating to proceedings upon petition of member, etc.) exists
with respect to the corporation.

15 Pa. C.S. §5764(a)(2)

At the hearing the Appellants attempted to prove that the conduct of
the Appellees constituted illegal, oppressive, or fraudulent acts of directors
or those in control of a corporation and that they misapplied or wasted
corporate assets, all in violation of the "conditions specified in section
5981(relating to proceedings upon petition of member, etc.)" referred to
above in Section 5764(a)(2).

The trial court determined that much of what the Appellants
complained of in the way of financial irregularities was due to missing

4

information for which records had never been maintained rather than
information that had been hidden. Two individuals who examined the
records of the corporation testified that they were not impressed with the
way the records were compiled and maintained but that they were unable to
uncover any irregularities that might constitute violations of the Law. A
significant finding was that the records found to be lacking in detail were
generated during a period when one of the appellants was in charge of the
board of directors. Also significant in the eyes of the trial court was the fact
that no one who demanded and received records from the board pursuant to
Section 5508(b) of the Law was sufficiently dissatisfied to pursue his rights
under subsection (c).3

3 15 Pa. C.S. §5508(c) provides in pertinent part:

§5508. Corporate records; inspection by members

(c) Proceedings for the enforcement of inspection by a member.--If the
corporation, or an officer or agent thereof, refuses to permit an inspection
sought by a member or attorney or other agent acting for the member
pursuant to subsection (b) or does not reply to the demand within five
business days after the demand has been made, the member may apply to
the court for an order to compel the inspection. The court shall determine
whether or not the person seeking inspection is entitled to the inspection
sought. The court may summarily order the corporation to permit the
member to inspect the membership register and the other books and
records of the corporation and to make copies or extracts therefrom; or the
court may order the corporation to furnish to the member a list of its
members as of a specific date on condition that the member first pay to the
corporation the reasonable cost of obtaining and furnishing the list and on
such other conditions as the court deems appropriate. Where the member
seeks to inspect the books and records of the corporation, other than its
membership register or list of members, he shall first establish:
(1) that he has complied with the provisions of this section respecting the
form and manner of making demand for inspection of such document; and
(2) that the inspection he seeks is for a proper purpose.

5

The Appellants complained that the Appellees had manipulated the
membership of the board in their favor by approving favorable candidates
and impeding the approval of those who were unfavorable. The trial court
found the testimony on this issue, even from the Appellants, to be confusing
and contradictory and concluded properly that the process by which
membership on the board was approved or denied did not constitute
oppressive or abusive conduct.

The trial court conducted a thorough hearing. The Appellants were
given ample opportunity to prove their allegations, and the Appellees were
given ample opportunity to refute them. The trial court did its homework;
its opinion contains a thorough, well-reasoned discussion of the case. The
closing paragraph of its Discussion of the issues sums up the trial court's
decision. We quote it with approval except as we explain below.

We must reiterate that this was a close call. It is clear that the
respondents, at times, utilized heavy-handed tactics in this
struggle, and that some shifting of loyalties among various
personages clouded the issues. However, we conclude that the
petitioners did not produce sufficient evidence to convince the
court that the drastic remedy of judicial supervision over the
corporation is appropriate. Instead, the corporation will be able
to conduct its own affairs in the usual course. We anticipate the
return to normalcy will include strict adherence to the
provisions of the bylaws, articles of incorporation and nonprofit
corporation law. Furthermore, because the constraints of the
status quo order will now be lifted, the open issues will be
played out to their appropriate end.

Trial court opinion, p. 23

6

We disagree with the trial court only on the following issue. As part
of their prayer for relief the Appellants asked the trial court, pursuant to 15
Pa. C.S. §5793,4 to review and set aside as null and void "The June 23, 1999
resolution to create a fund of not more than $1,500,000 for discretionary use
of the ICP." (Petition, p. 18). The transfer of those funds occurred after a
majority of the members of the Corporation called for a special meeting of
the board in a letter from their counsel dated May 28, 1999. The stated
purpose of that meeting was to consider the way the Corporation had been
managed and to consider the removal and replacement of directors. The
board, on two days notice, called a special meeting to be held on June 23,
1999 for the ostensible purpose of scheduling the meeting called for by the
membership. Also included on the agenda, however, was an item described
only as "ICP Funding." When this item came before the board, a majority of
the board voted to transfer the sum of $1.5 million from the Corporation to
ICP. The ICP is composed of four members of the board; the $1.5 million
was placed in a fund under their sole control. The special meeting of the

4. §5793 Review of contested corporate action

(a) General rule.--Upon petition of any person whose status as, or whose
rights or duties as, a member, director, member of an other body, officer
or otherwise of a nonprofit corporation are or may be affected by any
corporate action, the court may hear and determine the validity of such
corporate action.

(b) Powers and procedures.--The court may make such orders in any
such case as may be just and proper, with power to enforce the production
of any books, papers and records of the corporation and other relevant
evidence which may relate to the issue. The court shall provide for notice
of the pendency of the proceedings under this section to all persons
affected thereby. If it is determined that no valid corporate action has been
taken, the court may order a meeting to be held in accordance with section
5792 (relating to proceedings prior to corporate action).

7

membership was never called due to the status quo order issued by the trial
court.

The trial court referred to this transfer of funds as "[t]he closest thing
to a smoking gun in this case" (Trial court opinion, p. 18), but it refused to
consider the propriety of the transfer, deferring instead to the decision of the
board in reliance on Serbian Eastern Orthodox Diocese v. Milivojevich, 426
U.S. 696 (1976), and our decision in Posnecker v. Ricchio, 631 A.2d 1097
(Pa. Cmwlth. 1993), petition for allowance of appeal denied, 538 Pa. 651,
647 A.2d 905 (1994), cert. denied, 513 U.S. 1079 (1995). Serbian Orthodox
held that the civil courts are bound to accept the decisions of the highest
judicatory bodies of religious organizations on matters of discipline, faith,
internal organization, or ecclesiastical rule, custom or law. However, in
Posnecker, 631 A.2d at 1103, we held

[C]ivil courts may resolve disputes involving
churches that do not require a determination of
ecclesiastical issues ... [C]ourts may apply
principles of law which are religiously neutral,
such as statutes governing Pennsylvania nonprofit
corporations.

We cannot agree with the trial court that "[w]e would have to
determine that the ICP and/or its individual members were not part of the
church before we could rule that the transfer was an improper diversion of
corporate assets." (Trial court opinion, p. 18). The transfer of funds by

8

members of the board of a corporation established to support a church does
not become an "ecclesiastical issue" simply because the funds are
transferred to an ecclesiastical body, even if some or all of the members of
such a board hold ecclesiastical titles. The resolution of the dispute
regarding the transfer of the $1.5 million does not require a court to
determine any ecclesiastical issue. The propriety of the transfer of the $1.5
million was a pure question of corporate law that should have been
addressed by the trial court.

The meeting at which the transfer of funds was voted on and approved
was a special meeting of the board called, on two days notice, for the
ostensible purpose of scheduling a meeting called for by the membership
which would examine the way the corporation had been managed and
address the removal and replacement of directors. The special meeting
called for by the members was never held because the action which resulted
in this appeal was filed and a status quo order was issued. The fact that the
meeting objected to here was held on two days notice means that the
meeting was held in violation of 15 Pa. C.S. §5703(b) that requires that
written notice of a special meeting of the board of a nonprofit corporation be
given to each director or member of that board "at least five days before the
day named for the meeting." Any action taken at that meeting was,
therefore, ultra vires and void.

Accordingly, we affirm the opinion of the Court of Common Pleas of
Montgomery County in this matter except to the extent that it addresses the

9

circumstances surrounding the special meeting of the board held on June 23,
1999. We vacate the order as it may apply to those circumstances and we
remand this matter to the trial court with instructions to order, pursuant to
the powers granted to it under 15 Pa. C.S. §§5792 and 5793, a meeting of the
membership as called for by the members in their letter from counsel dated
May 28, 1999. The notice of the meeting shall comply in all ways with 15
Pa. C.S. §5704 which requires, among other things, that members be given
no less than five days notice of the meeting and that the notice "shall specify
the general nature of the business to be transacted." The purpose of that
meeting shall be to consider the issues stated by the members in their May
28, 1999 letter and any other business that may be lawfully transacted at
such a meeting. The order of the trial court preserving the status quo in this
matter dated May 1, 2002 shall remain in effect until the meeting of the
membership ordered by the trial court is convened.

________________________________________
JAMES GARDNER COLINS, President Judge

Judge Smith-Ribner and Judge Leadbetter dissent.

10

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

In Re:

:

The Lord's New Church

:
Which is Nova Hierosolyma

:

:
Appeal of: Feodor Pitcairn,

:
Laren Pitcairn and

: No. 1199 C.D. 2002
Miriam Pitcairn Mitchell

:

O R D E R

AND NOW, this 4th day of February 2003, we affirm the opinion of
the Court of Common Pleas of Montgomery County in this matter dated
December 4, 2001, except to the extent that it addresses the circumstances
surrounding the special meeting of the board held on June 23, 1999. We
vacate the order as it may apply to those circumstances, and we remand this
matter to the trial court with instructions to order, pursuant to the powers
granted to it under 15 Pa. C.S. §§5792 and 5793, a meeting of the
membership as called for by the members in their letter from counsel dated
May 28, 1999. The notice of the meeting shall comply in all ways with 15
Pa. C.S. §5704 which requires, among other things, that members be given
no fewer than five days notice of the meeting and that the notice "shall
specify the general nature of the business to be transacted." The purpose of
that meeting shall be to consider the issues stated by the members in their
May 28, 1999 letter and any other business that may lawfully be transacted
at such a meeting.

The order of the trial court preserving the status quo in this matter
dated May 1, 2002 shall remain in effect until the meeting of the
membership ordered by the trial court is convened.
Jurisdiction
is
relinquished.

________________________________________
JAMES GARDNER COLINS, President Judge