Court Opinion

ID: 9649533
Source: CourtListenerOpinion
Date Created: 2023-08-23 14:58:51.403381+00
Date Added: 2024-06-11T18:12:11.912217
License: Public Domain

DISSENTING OPINION BY
Judge PELLEGRINI.
This appeal involves whether the Court of Common Pleas of Bucks County (trial court) erred by overruling the preliminary objection filed by Independence Blue Cross (IBC) in which it argued that Counts I and IV of the complaint filed by Jules Ciamaichelo (Ciamaichelo) should be dismissed because Ciamaichelo lacks standing to maintain this action under the Nonprofit Corporation Law of 1988 (Nonprofit Law), 15 Pa.C.S. §§ 5101-6162.1 Because I disagree to that portion of the majority’s opinion concluding that Ciamai-chelo, a single subscriber, has standing to challenge the “corporate action” of IBC, I respectfully dissent.
Rob Stevens, Inc. has a group medical insurance policy for which it pays premiums to IBC to insure its employees. Cia-maichelo is the President of Rob Stevens, Inc. and is insured with IBC under its group policy as a subscriber. The question here is whether “a” subscriber has standing to challenge the “validity” of corporate actions under 15 Pa.C.S. § 5793(a) which provides:
(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. (Emphasis and bold added.)
The majority finds that he has standing to challenge the IBC’s “corporate action” of allowing incidental profits to accumulate because he falls within the “otherwise” category because, as a “subscriber,” under the bylaws, he is given special powers because a subscriber is in the same general class as members, members of other body or directors. I disagree with the majority because an analysis of what “otherwise” means within the framework of the Nonprofit Law leads to the inescapable *416conclusion that only those given the powers of governance under the Nonprofit Law fall within that term. Because a single subscriber has no governance rights under the IBC Articles of Incorporation or the Nonprofit Law, I would hold that a single subscriber is not an “otherwise” for purposes of being able to challenge a corporate action.
Under the Nonprofit Law, the affairs of the corporation, unless stated otherwise in the corporate bylaws, are under the direction of its board of directors. 15 Pa. C.S. § 5721. The method for electing a board of directors and adopting bylaws are determined by how the nonprofit is organized. In Pennsylvania, a nonprofit corporation can be organized either on a non-stock basis or on a stock-share basis. 15 Pa.C.S. § 5752(a).
Under the stock-share option, the holder of the stock is entitled to one vote per nontransferable share on the adoption of corporate bylaws and election of directors. 15 Pa.C.S. § 5752. If a corporation organizes on a non-stock basis, it can have members or non-members. 15 Pa. C.S § 5306(a)(7).2 If the corporation organizes on a member basis, the members are given the power to adopt the bylaws and elect and remove directors. 15 Pa.C.S. §§ 5504 and 5726. Members can be required to make capital contributions to the corporation and are liable for judgments and debts to the limits of their contributions, 15 Pa. C.S. § 5552, and when the nonprofit is dissolved, they are entitled to the assets of the nonprofit. 15 Pa.C.S. § 5975.
The other non-stock option is to have no members with directors themselves nominating directors or as set forth in the Articles of Incorporation and the bylaws adopted. 15 Pa.C.S. § 5306(H).3 IBC has chosen this option.
The IBC Articles of Incorporation provide that it “is organized upon a non-stock basis and shall have no members.”4 Arti-*417cíe V. They give the board of directors the Ml authority to adopt, amend and repeal the IBC bylaws (Article VIII(b)) and the power to fix the method by which directors are elected in the bylaws. Article VI(6). The Articles of Incorporation also give the Governor of Pennsylvania, the Mayor of the City of Philadelphia, the President of City Council, the Chairman of County Council of Delaware County, and the Chairman of the Board of Bucks, Chester and Montgomery Counties, the power to appoint one person to the board of directors as set forth in the bylaws. Article VT(b). See 15 Pa.C.S. § 5767.5
Certain rights are given under IBC Articles of Incorporation to “groups” of subscribers. Five percent of the subscribers are given the power to propose to the board of directors changes to the bylaws, sale, merger or voluntary dissolution that the directors may or may not adopt. Article VII(b). The bylaws also permit 300 subscribers to nominate any eligible person to the board of directors, which the directors may or may not elect. Article VI(e). Five percent of the board of directors is allowed to call for a special meeting of subscribers which, at a majority of the subscribers, can remove any individual director or the entire board of directors by a majority of the subscribers. Article VII.
By giving a specified number of subscribers those powers under the Articles of Incorporation, subscribers are an “other body” under the Nonprofit Law. 15 Pa.C.S. § 5103 defines “other body” as:
[A] person or group, other than the board of directors or a committee thereof, who pursuant to authority expressly conferred by this subpart may be vested by the bylaws of the corporation with powers which, if not vested by the bylaws in such person or group, would by this subpart be required to be exercised by either:
(1) the membership of a corporation taken as a whole;
(2) a convention or assembly of delegates of members established pursuant to any provision of this subpart; or
(3) the board of directors.
Except as otherwise provided in this subpart a corporation may establish distinct persons or groups to exercise different powers which this subpart authorizes a corporation to vest in an other body. (Emphasis added.)
As an “other body” given those corporate powers, that “other body” would fall within the “otherwise” category as used in 15 Pa.C.S. § 5793(a) and have standing to maintain this action. The question here is whether one subscriber has the right to bring the action on behalf of the “other body” or whether the rights of the “other body” have to be exercised by a “group” of subscribers.6
*418In this case, the IBC Articles of Incorporation vests power in “distinct ... groups” of subscribers to “exercise different powers” — 300 subscribers to nominate a director, five percent of the subscribers to propose what a single director can propose, or the majority who can take action that the full board of directors can take regarding corporate governance. While each of those “distinct groups” may be the “other bodjr” depending on what is involved, one thing is clear — a single subscriber has no power to do anything regarding the governance of IBC. Having no power to do anything, a single subscriber, such as Ciamaichelo, is not the “other body” and as a result, does not have standing under 15 Pa.C.S. § 5793(a) to maintain this action.
Accordingly, I respectfully dissent and would reverse the trial court’s decision overruling IBC’s preliminary objection to Ciamaichelo’s standing and right to relief regarding Counts I and IV.
President Judge LEADBETTER joins this dissenting opinion.
Judge LEAVITT did not participate in the decision of this case.

. In Count I of the complaint, Ciamaichelo alleged that IBC violated Section 5545 of the Nonprofit Law, 15 Pa.C.S. § 5545, by failing to apply all incidental profits to the maintenance and operation of IBC’s lawful activities. In Count IV of the complaint, Ciamaichelo alleged that he was entitled to inspect the corporate books and records under Sections 5508 and 5793(b) of the Nonprofit Law, 15 Pa.C.S. §§ 5508 and 5793(b).

. Not only does 15 Pa. C.S § 5306(a)(7) provide that a corporation can incorporate without members, but 15 Pa.C.S. § 5725(b) provides:
(b) Corporations without voting members. — Where the articles provide that the corporation shall have no members, as such, or where a nonprofit corporation has under its bylaws or in fact no members entitled to vote on a matter, any provision of this article or any other provision of law requiring notice to, the presence of, or the vote, consent or other action by members of the corporation in connection with such matter shall be satisfied by notice to, the presence of or the vote, consent or other action by the board of directors or other body of the corporation.

. 15 Pa.C.S. § 5306(11) provides:
(a) General rule. — Articles of incorporation shall be signed by each of the incorporators and shall set forth in the English language:
(11) Any other provisions that the incor-porators may choose to insert if:
(i) any provision of this subpart authorizes or requires provisions pertaining to the subject matter thereof to be set forth in the articles or bylaws of a nonprofit corporation or in an agreement or other instrument; or
(ii) such provisions are not inconsistent with this subpart and relate to the purpose or purposes of the corporation, the management of its business or affairs or the rights, powers or duties of its members, security holders, directors or officers.

.19 Pa.Code § 41.7 provides:
Section 5306(a)(7) of the [Nonprofit Law] (relating to articles of incorporation) authorizes the articles of incorporation of a nonprofit corporation to specify that the corporation is to have no members. In that case, section 5751(b) of the NPCL (relating to classes and qualifications of membership) provides that a provision of law requiring notice to, the presence of, or the vote, consent or other action by members of a nonprofit corporation shall be satisfied by notice to, the presence of, or the vote, consent or other action by the board of directors or other body of the corporation. A *417typical provision of the articles reads as follows:
The corporation shall have no members.

. 15 Pa.C.S. § 5767 provides:
Such power to vote in respect to the corporate affairs and management of a nonprofit corporation and other membership rights as may be provided in a bylaw adopted by the members may be conferred upon:
(1) Registered holders of securities evidencing indebtedness issued or to be issued by the corporation.
(2) The Commonwealth or any political subdivision thereof or other entity prohibited by law from becoming a member of a corporation.

. Because 15 Pa.C.S. § 5793(a) specifically allows a "member of an other body” to maintain an action, if a subscriber fell within that definition, we would not need to make an analysis if a subscriber fell within the "otherwise” class. A "member” is a defined term defined as “[o]ne having membership rights in a corporation in accordance with the provi*418sions of its bylaws.” A member of a nonprofit corporation that created a nonprofit-subsidiary, then become "members of other bodies” that can take action to control its actions. Subscribers do not fall within this definition.