Opinion ID: 3009944
Heading Depth: 2
Heading Rank: 2

Heading: Inadequacy of representation

Text: Finally, an applicant has '[t]he burden, however minimal . . . to show that his interests are not adequately represented by the existing parties.' Brody, 957 F.2d at 1123 (quoting Hoots v. Pennsylvania, 672 F.2d 1133, 1135 (3d Cir. 1982)). In its Answer, Alpha does not defend on the grounds that its contracts with DEFCO and National Housing are void as illegal. App. at 40-42.2 The Pennsylvania Supreme Court applies the general rule that an agreement which violates a provision of a statute, or which cannot be performed without violation of such a provision, is illegal and void. American Ass'n of Meat Processors v. Casualty Reciprocal Exch., 588 A.2d 491, 495, 527 Pa. 59, 68 (1991). An illegal contract can never provide the 2 Alpha does raise the defense of impossibility of performance because the trust agreements themselves prevent private inurement. See Answer ¶38, App. at 41. basis for a cause of action: The law when appealed to will have nothing to do with it, but will leave the parties just in the condition in which it finds them. Id. (quoting Dippel v. Brunozzi, 74 A.2d 112, 114-15, 365 Pa. 264 (1950)). Alpha is not barred from contending that the contracts violate §501(c)(3) or OMB Circular A-122, but its Answer does not set forth the defense.3 If the district court determines that Alpha's contracts violated §501(c)(3) or OMB Circular A-122, however, the contracts might still be enforceable; Alpha would simply lose its tax exemption. Hence Sylvan wishes to argue that, even if not void as illegal, Alpha's contracts are voidable as unauthorized by its corporate charter or by-laws. See, e.g., Bolduc v. Board of Supervisors, 618 A.2d 1188, 1190-91, 152 Pa.Commw. 248 (Pa.Commw. 1992)(contract voidable when entered into by township acting beyond its corporate powers), appeal denied, 625 A.2d 1195, 533 Pa. 662 (1993). Alpha has not and may not raise the defense of ultra vires. 15 Pa.C.S. §5503; Downing v. School Dist., 61 A.2d 133, 138, 360 Pa. 29, 40 (1948)(a corporation which has received and retained the benefits and advantages of a contract should not be allowed to escape its obligations upon a plea of ultra vires); Wagner v. Somerset County Memorial Park, Inc., 93 A.2d 3 Under the Pennsylvania and federal rules, illegality is an affirmative defense which must be pleaded, but under Pennsylvania law the defense is not waived by failure to plead it. Fed.R.Civ.P. 8(c); Pa.R.Civ.P. 1030(a); American Ass'n of Meat Processors, 588 A.2d at 495-96. 440, 442, 372 Pa. 338 (1953); American Mut. Liability Ins. Co. v. Bollinger Corp., 402 F.Supp. 1179, 1186 (W.D.Pa. 1975). Sylvan alleges that defendant's charter empowers it to undertake only those activities permitted by §501(c)(3), and thus a transaction yielding private inurement would be ultra vires. See Motion to Intervene, App. at 71-72.4 See also By-Laws, Supplemental Appendix (S.A.) at 143. In addition, Sylvan alleges that the charter authorizes Alpha to pay only reasonable compensation for services rendered. App. at 72. See also ByLaws, S.A. at 144. Consequently, we conclude that Alpha has not and cannot adequately represent Sylvan's interests, as defendant has failed to raise the defense of illegality and is statutorily prohibited from arguing that the contracts are ultra vires. In sum, Sylvan has satisfied its burden under Rule 24(a)(2), and it was an abuse of discretion to deny its motion for intervention.