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LESTER SMILEY v. RICHARD L. LININGER (06/20/78)

decided: June 20, 1978.

LESTER SMILEY, JR., ROBERT C. ALLEN, DARL C. FERGUSON, JR. AND OTHERS SIMILARLY SITUATED, APPELLANTS
v.
RICHARD L. LININGER, HARRIS G. BRETH AND J. HAROLD MCFADDEN, COMMISSIONERS OF CLEARFIELD COUNTY ET AL., APPELLEES



Appeal from the Order of the Court of Common Pleas of Clearfield County in case of Lester Smiley, Jr., Robert C. Allen, Darl C. Ferguson, Jr. and others similarly situated v. Richard L. Lininger, Harris G. Breth and J. Harold McFadden, Commissioners of Clearfield County; Clearfield County Industrial Development Authority; Community Medical Services of Clearfield, Inc.; and Hicks Construction Co., Inc., No. 74-20-EQU.

COUNSEL

Joan P. Feldman, with her Melvin Schwartz, and Baskin, Boreman, Wilner, Sachs, Gondelman & Craig, for appellants.

David E. Blakley, with him Blakley & Jones, for appellees.

Judges Mencer, Rogers and DiSalle, sitting as a panel of three. Opinion by Judge Rogers.

Author: Rogers

[ 36 Pa. Commw. Page 170]

The appellants, Lester Smiley, Jr., Robert C. Allen and Darl C. Ferguson, Jr., have appealed an order of the Court of Common Pleas of Clearfield County dismissing their taxpayer's suit in equity against the Commissioners of Clearfield County (Commissioners),

[ 36 Pa. Commw. Page 171]

    the Clearfield County Industrial Development Authority (Authority), Community Medical Services of Clearfield, Inc. (Medical Services) and Hicks Construction Co., Inc. (Hicks).

On September 23, 1973, the County Commissioners conveyed a county nursing home facility to the Authority for the consideration of $1,100,000. The Authority in turn sold the facility to Medical Services by an installment sales agreement dated October 1, 1973 and executed December 17, 1973. The terms of this agreement provided, among other matters: (1) that the Authority should issue 1973 series bonds dated October 1, 1973 not in excess of $3,875,000 to raise funds necessary to acquire the nursing home from the county and to meet expenses for planned improvements and additions to the home; (2) that Pennsylvania Medical Services, Inc., of which Medical Services is a wholly owned subsidiary, would manage the nursing home pursuant to a management and consultant agreement it had entered into with Medical Services, and (3) that Medical Services would make scheduled monthly installment payments designed to retire the outstanding Authority bonds, with the added proviso that:

Upon completion of payment of all other required installment payments as required herein and the satisfaction of all [Authority] bonds . . . , [Medical Services] elects at its option to complete the sale contemplated herein, [Medical Services shall then pay the additional] lump sum of $20,000,000. In the event [Medical Services] at that time should decide not to complete its acquisition of the Project by making said lump sum payment, title will not be transferred and the Project shall remain the property of the [Authority].

[ 36 Pa. Commw. Page 172]

Medical Services thereafter hired Hicks to perform the work involved in renovating the existing nursing home and constructing the additions thereto.

On August 27, 1974, a date after the sale of the Authority's bonds, appellants filed a taxpayer's complaint in equity against the Commissioners alleging that a number of Pennsylvania laws were violated in the transactions we have hereinbefore described. As a result of an order of the court below, the appellants filed an amended complaint on March 18, 1975 which named as additional defendants the Authority, Medical Services and Hicks.*fn1 No preliminary relief was ever sought. The appellants' original and amended complaints included requests for the following relief:

A. That [the court below] set aside the conveyance of the County Nursing Home to the Clearfield County ...


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