Negley v. Lebanon Community School Corp.

• Decision Date: 27 April 1977
• Docket Number: No. 1--1176A225,1--1176A225
• Citation: 362 N.E.2d 178,173 Ind.App. 17
• Parties: Harold H. NEGLEY, Superintendent of Public Instruction of the State of Indiana, Defendant-Appellant, v. LEBANON COMMUNITY SCHOOL CORPORATION and Lebanon Elementary School Building Corporation, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 178

362 N.E.2d 178

173 Ind.App. 17

Harold H. NEGLEY, Superintendent of Public Instruction of the State of Indiana, Defendant-Appellant, v. LEBANON COMMUNITY SCHOOL CORPORATION and Lebanon Elementary School Building Corporation, Plaintiffs-Appellees.

No. 1--1176A225.

Court of Appeals of Indiana, First District.

April 27, 1977.

Rehearing Denied May 19, 1977.

Theodore L. Sendak, Atty. Gen., Arthur Thaddeus Perry, Deputy Atty. Gen., Indianapolis, for defendant-appellant.

David S. Richey, Parr, Richey, Obremskey & Morton, Lebanon, J. V. Boles, Kendall, Stevenson & Lowry, Danville, for plaintiffs-appellees.

ROBERTSON, Chief Judge.

Harold Negley, Superintendent of Public Instruction of the State of Indiana (hereinafter Superintendent), appeals from an interlocutory order enjoining him from preventing the utilization of the 'Design-Build' process in constructing a new elementary school by the Lebanon Community School Corporation and the Lebanon Elementary School Building Corporation.

The Lebanon Community School Corporation (School Corporation) operates the school system in Lebanon, Indiana. The School Corporation intended to construct a new elementary school building in Lebanon in conjunction with the Lebanon Elementary School Building Corporation (Building Corporation). The Building Corporation was established pursuant to IC 1971, 21--5--11--1 et seq. (Burns Code Ed.) to construct and finance the elementary school and then lease it to the School Corporation.

The Building Corporation used the 'Design-Build' concept in formulating specifications and plans for the building. 'Design-Build' is a relatively new concept in the construction of school buildings. Under the 'Design-Build' concept a school building corporation prepares a preliminary set of performance specifications for the construction project. These specifications are put out for bids, and the contractors and architects, using the specifications, submit proposals to design and build the project at a guaranteed price. Thus, instead of having a number of bids on the same design, each proposal represents a complete and different design. The building corporation then evaluates the proposed designs and elects the best and lowest bid.

The School Corporation submitted its educational and performance specifications to be used with the 'Design-Build' process to the Department of Public Instruction. The Supreintendent granted preliminary approval to the School Corporation's plans on June 28, 1976. Pursuant to this preliminary approval, the School Corporation proceeded to obtain six-month options on land upon which to build the school building. The performance specifications were then put out for bids, and a number of proposals were received.

Prior to the Superintendent's preliminary approval of the School Corporation's building plans, the Attorney General, in Official Opinion No. 8, May 26, 1976, stated that a school corporation could not use the 'Design-Build' concept because such procedure was not in compliance with this State's competitive bidding statutes, IC 1971, 5--16--1--1 et seq. (Burns Code Ed.). Subsequently, on July 28, 1976, the Attorney General, in response to an inquiry made by the Superintendent, issued an advisory letter to the Superintendent stating that school building corporations could not employ the 'Design-Build' method because such was in contravention of the competitive bidding statutes. The Superintendent, thereafter, refused to give final approval to the School Corporation's and Building Corporation's plans to proceed under the proposed 'Design-Build' process.

On August 27, 1976, the School Corporation and Building Corporation initiated this action seeking a declaratory judgment as to the use of 'Design-Build' and to temporarily enjoin the Superintendent from prohibiting the construction of the elementary school until a final determination on the merits had been made. After a hearing on the application for a preliminary injunction, the trial court entered its findings of fact and conclusions of law and issued the following order granting the preliminary injunction:

'IT IS, THEREFORE, CONSIDERED, ORDERED, ADJUDGED AND DECREED BY THE COURT that Plaintiffs; Request for Temporary Injunction be and the same hereby is granted, and the Defendant, Harold H. Negley, Superintendent of Public Instruction of the State of Indiana, be and hereby is enjoined and restrained from denying to Plaintiffs the utilization of the 'Design-Build' process whereby Plaintiff, Lebanon Elementary School Building Corporation would construct, finance and own the Stokes Elementary School Building and lease the same to Lebanon Corporation.'

The Superintendent appeals from the trial court's interlocutory order granting the preliminary injunction, alleging that the trial court's conclusions of law are erroneous and contrary to law. The sole issue presented for our review is whether the public bidding requirements found in IC 1971, 5--16--1--1 et seq. (Burns Code Ed.) apply to the arrangement wherein a school building corporation constructs and owns a school building and leases it to a school corporation.

The grant or denial of a preliminary injunction rests within the sound discretion of the trial court, and this Court will not interfere with the exercise of that discretion unless it is shown that the trial court's action was arbitrary or constituted a clear abuse of discretion. Rosenburg v. Village Shopping Center, Inc. (1968), 251 Ind. 1, 238 N.E.2d 642. In determining whether an abuse of discretion exists, we are necessarily involved with a review of the trial court's findings of fact and conclusions of law. Angel v. Behnke (1975), Ind.App., 337 N.E.2d 503. This Court may not set aside the trial court's findings or judgment unless they are clearly erroneous. Indiana Rules of Procedure, Trial Rule 52. Thus, if the findings of fact or conclusions of law are clearly erroneous, we may conclude that the trial court abused its discretion in granting a preliminary injunction. Angel v. Behnke, supra.

The Superintendent contends that the following conclusion of law is clearly erroneous and an incorrect interpretation of the statutes:

'2. That the Public Works Statutes and, specifically the public competitive bidding requirements found at IC 1971, 5--16--1--1 through 5--16--1--3, do not apply where a municipal corporation is leasing property and thus are not binding upon a school building corporation which constructs, finances and owns a school building and leases it to a school corporation, such as Plaintiffs' (sic) in this cause.'

We are of the opinion that the trial court correctly interpreted the law, and we, therefore, find no abuse of discretion in the trial court's grant of the preliminary injunction.

The Superintendent maintains that school corporations and school building corporations must comply with the applicable competitive bidding requirements before entering into the construction of school building. The Building Corporation and School Corporation counter by asserting that lease agreements do not fall within the ambit of the competitive bidding statutes.

The statutory requirements concerning competitive bidding for public works are found in IC 1971, 5--16--1--1 (Burns Code Ed.) which in pertinent part provides as follows:

'When any public building or any other public work or improvement of any character whatsoever is to be constructed, erected, altered or repaired at the expense of the state or at the expense of any county, city, town, township, school corporation, public utility owned or operated by any city of the second, third, fourth, or fifth class or by any town, or other political subdivision, or commission created by law excepting the state highway department of Indiana, and when the estimated costs of such work or improvement will be five thousand dollars ($5,000) or more, it shall be the duty of the board, commission, trustee, officer or agent acting on behalf of the state, county, city, town, township, school corporation, public utility owned or operated by any city of the second, third, fourth or fifth class or by any town, or other political subdivision or commission created by law, excepting the state highway department, to adopt plans and specifications and award a contract for such public work or improvement to the lowest and best bidder who submits a bid for the performance thereof . . ..

'. . . Provided, however, That no construction or alteration of any public building, the estimated cost of which is more than five thousand dollars ($5,000) shall be undertaken by any officer or agent hereinbefore mentioned or referred to except pursuant to and in compliance with plans and specifications therefor approved by a duly licensed architect or engineer: Provided further, That said requirement as to compliance with plans and specifications therefor to be approved by a duly licensed architect or engineer shall apply to the construction or alteration of a public school building only when the estimated cost of such construction or alteration is more than five thousand dollars ($5,000). For the purpose of securing such bids and/or for the purpose of causing the work to be done in the desired manner, the state, county, city, town, township, school corporation, public utility owned...