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FLOYD SCHRECENGOST v. ARMSTRONG SCHOOL DISTRICT (07/31/81)

filed: July 31, 1981.

FLOYD SCHRECENGOST, DWIGHT MCKINLEY, WILLARD KIMMEL AND DWIGHT CLAYPOOLE, APPELLANTS,
v.
ARMSTRONG SCHOOL DISTRICT, ANTON J. BRENCE AND THE ARMSTRONG SCHOOL DISTRICT BOARD OF DIRECTORS



No. 148 Pittsburgh, 1980, Appeal from the Final Decree of the Court of Common Pleas, Civil Division, of Armstrong County, No. 1979-1723 Civil.

COUNSEL

J. D. Heim, Kittanning, for appellants.

Robert D. Hazlett, Pittsburgh, Robert Pryde, Kittanning, for appellees.

Hester, Brosky and Van der Voort, JJ.

Author: Hester

[ 289 Pa. Super. Page 295]

In this equity action, appellants, taxpayers of the Armstrong School District, seek to enjoin the district school directors from implementing their long range development plan for upgrading and improving the district's school facilities, including the construction of two new schools. Following a hearing below, the court filed an adjudication denying relief and dismissing the complaint. Appellants' exceptions were thereafter denied and a final decree entered, following which the instant appeal was taken. We now affirm.*fn1

The pertinent facts may be summarized as follows. Beginning in 1977, the appellee School Board began formulating plans to bring its school buildings up to standards required by the Pennsylvania Department of Labor and Industry and to provide for much needed classroom space. This long range plan envisioned the construction of two new schools -- West Hills secondary and Ford City secondary. Additionally, six existing school buildings were marked for alterations, renovations, and improvements. The Board hired an architect, Robert T. Scheeren, who studied the existing facilities and outlined for the Board the long range plan, projecting a cost of $24 million. Mr. Scheeren advised the Board that if they simply remodeled the Ford City school, instead of building a new facility, they could realize a savings of approximately $1,100,000. The Board eventually decided in favor of constructing a new school because it needed the flexibility of a new facility as well as the added space.

[ 289 Pa. Super. Page 296]

To finance the huge construction cost, the School Board considered a number of alternatives, including application for funds through the State School Building Authority, but eventually decided to finance the project by means of a local school district bond issue. Various investment banking firms were interviewed and proposals were received before the Board selected Moore, Leonard & Lynch as the firm to consult in developing the financing aspects of the long range plan. At the time suit was instituted below, the Board intended to sell the bonds to Moore, Leonard & Lynch pursuant to a negotiated sale, as opposed to competitive bidding. The Board then proposed to invest the bond proceeds, in the principle sum of $22,500,000, in short term money market funds, pending actual need of the cash. Since the Pennsylvania Department of Education had not yet approved the Board's construction plans, as required by law, the Board thus hoped that the income generated by the money market investment could eventually be used in its building plans and reduce overall cost. Should the state authority disapprove any portion of the construction program, the Board would simply retire any unused bonds, pursuant to its optional five year in part call. It was admitted that several Board members had accepted dinners and other entertainment from representatives of Moore, Leonard & Lynch during the time that firm was interested in handling the bond issue. It was further stated that the proposed construction plan would cause an increase in taxes for residents of Armstrong School District, although the precise amount of the increase was impossible to project.

Before the Directors of the School Board could issue the bonds, appellants filed the instant equity action seeking to enjoin the Board from proceeding with the issue and from any further action in construction or gaining approval for construction of the proposed projects. Following a one-day hearing, relief was denied.

Recently, our courts have had occasion to consider the proper judicial function in cases of this type:

"In order for a court of equity to grant relief, it must clearly be shown that the school ...


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