alva-electric-inc-arc-construction-co-inc-danco-construction-inc ( 2013 )

FOR PUBLICATION
ATTORNEYS FOR APPELLANTS: ATTORNEYS FOR APPELLEES:
JON LARAMORE Evansville Vanderburgh School Corporation
APRIL E. SELLERS PATRICK A. SHOULDERS
SHIV GHUMAN O’NEILL DIRCK H. STAHL
Faegre Baker Daniels LLP Ziemer, Stayman, Weitzel & Shoulders, LLP
Indianapolis, Indiana Evansville, Indiana
A.J. MANION EVSC Foundation, Inc.
Manion Stigger RICHARD T. MULLINEAUX
Evansville, Indiana CRYSTAL G. ROWE
WILLIAM F. ENGLISH
Kightlinger & Gray, LLP
New Albany, Indiana
IN THE Mar 06 2013, 8:28 am
COURT OF APPEALS OF INDIANA
ALVA ELECTRIC, INC., ARC CONSTRUCTION )
CO., INC., DANCO CONSTRUCTION, INC., )
DEIG BROTHERS LUMBER & CONSTRUCTION )
CO., INC., EMPIRE CONTRACTORS, INC., )
PEYRONNIN CONSTRUCTION CO., INC., )
WEDDLE BROTHERS CONSTRUCTION )
COMPANY, INC., and WINK )
CONSTRUCTION, INC., )
)
Appellants-Plaintiffs, )
)
vs. ) No. 82A01-1201-PL-2
)
EVANSVILLE VANDERBURGH SCHOOL )
CORPORATION and EVSC FOUNDATION, INC. ,)
)
Appellees-Defendants. )
APPEAL FROM THE VANDERBURGH CIRCUIT COURT
The Honorable Gregory A. Smith, Special Judge
Cause No. 82C01-1102-PL-78
March 6, 2013
OPINION - FOR PUBLICATION
KIRSCH, Judge
Eight contracting firms (“Contractors”),1 on behalf of themselves and all similarly
situated taxpayers within the district of Evansville Vanderburgh School Corporation (“School
Corporation”), sued School Corporation and EVSC Foundation, Inc. (“Foundation”) for
declaratory judgment and injunctive relief, claiming that School Corporation’s renovation of
an administration building should have been subject to the competitive bidding procedures
required for a public work project under Indiana Code section 36-1-12-4 and that the actions
taken to accomplish the renovation constituted an antitrust violation under Indiana Code
section 24-1-2-3. Contractors filed a motion for summary judgment and School Corporation
and Foundation each filed cross-motions for summary judgment. The trial court denied
Contractors’ motion and granted summary judgment in favor of School Corporation and
Foundation.
On appeal, we address the following consolidated and restated issues:
I. Whether the issues before this court are moot;
II. Whether the trial court erred in granting summary judgment in favor of
School Corporation and Foundation on Contractors’ claim:
(A) under Indiana’s Public Lawsuit Statute (“Public Lawsuit Statute”),
Indiana Code sections 34-13-5-1 through -12, because the renovation of
the administration building constituted a public work project that
should have been subject to the public bidding laws of Indiana Code
chapter 36-1-12; and
(B) because the combination of the six contracts used to renovate the
administration building was a “scheme, contract, or combination to
restrain or restrict bidding for the letting of any contract for a private or
public work,” in violation of Indiana’s Antitrust Act (“Antitrust Act”),
Indiana Code sections 24-1-2-1 through -12.
1
The Contractors include the following firms: Alva Electric, Inc., Arc Construction Company, Inc.,
Danco Construction, Inc., Deig Brothers Lumber & Construction Co., Empire Contractors, Inc., Peyronnin
Construction Company, Inc., Weddle Brothers Construction Company, Inc., and Wink Construction Inc.
2
We reverse and remand with instructions.
FACTS AND PROCEDURAL HISTORY2
School Corporation is the public school corporation in Evansville, Vanderburgh
County, Indiana, which exists under the authority of Indiana Code sections 20-23-4-1 through
-45. Foundation is a private, not-for-profit, public school endowment corporation “formed to
provide educational resources within the meaning of Indiana Code [section] 20-47-1-2 to the
. . . School Corporation and to operate exclusively for charitable purposes within the meaning
of Section 501(c)(3) of the Internal Revenue Code, and for educational, charitable and
scientific purposes within the meaning of Indiana Code 20-47-1-2.” Id. at 707. Contractors
do business and pay taxes in Vanderburgh County and allege that the contract for the
renovation project at the heart of this dispute was not awarded pursuant to public bidding
laws.
In 2009, the State of Indiana announced a $6.5 million reduction in School
Corporation’s annual funding. Thereafter, School Corporation investigated various cost-
saving initiatives. One of such initiatives involved moving all of School Corporation’s
administrative offices, which were located in multiple buildings throughout Evansville, into
an existing building on Walnut Street (“the Building”) owned by School Corporation and
previously used as a warehouse. According to School Corporation, the move was designed to
maximize efficiency, preserve resources, and decrease School Corporation’s costs in the
2
We held oral argument on November 20, 2012 in Indianapolis. We commend counsel on the quality
of their written and oral advocacy.
3
amount of $517,360 per year. Appellants’ App. at 983. To fit School Corporation’s needs,
however, renovation of the Building was necessary.
In December 2009, the Facilities Director for School Corporation contacted an
Evansville architectural firm, Hafer Associates (“Hafer”), to inquire about the feasibility of
renovating the Building for use as a school administration building, and Hafer confirmed that
the renovation was feasible. On January 11, 2010, School Corporation publicly announced
that it intended to relocate its administrative offices to the Building. The next day, Hafer
held a meeting with officials of School Corporation to discuss School Corporation’s needs,
aesthetic preferences, and approximate budget. School Corporation hired Hafer to design the
renovation. During the design period, Hafer, who understood School Corporation to be its
sole client, held meetings on the status of the project. No one from the Foundation attended
those meetings. Around June 1, 2010, Hafer mailed plans for the renovation to School
Corporation. Hafer believed School Corporation would advertise the project to prospective
contractors and solicit bids. School Corporation paid Hafer approximately $250,000 for the
design work.3
In August 2010, after Hafer’s design was finalized and sealed, School Corporation
determined it did not have sufficient funds in its capital projects fund to pay for the
renovation. School Corporation also determined that using the debt service fund to finance
3
It is unclear exactly how much Hafer was paid for its services on the project. By deposition, Jeffrey
Justice, Managing Principal of Hafer, testified that School Corporation paid Hafer for invoiced services in the
amount of $250,000. Appellants’ App. at 261-62. Foundation’s contract with Industrial Contractors, Inc.
(“ICI”), the company that completed the Building renovations, provides for, what appears to be, an additional
payment to Hafer in the amount of $325,595. Id. at 313.
4
the project was an undesirable option for several reasons, including the delay and added
expense involved in the issuance of bonds and the resulting need to raise taxes to obtain
sufficient funds to repay the bonds.
On October 29, 2010, School Corporation officials met with representatives of
Industrial Contractors, Inc. (“ICI”) to discuss the renovation of the Building. In the previous
years, ICI had bid on at least ten projects for School Corporation through public bidding, but
had been awarded only one project—a roofing project. School Corporation understood that,
while it could not legally take on debt, ICI could finance the renovation of the Building.
School Corporation “pitched” to ICI an arrangement to renovate the Building, whereby
School Corporation would convey the Building to Foundation, and Foundation then would
contract with ICI to renovate the Building. Appellants’ Br. at 6; Appellants’ App. at 293.
Foundation would then pay ICI over time for the renovations. Specifically, the renovated
Building would then be paid for by Foundation with a “deferred payment schedule
guaranteed by [a] rent/lease agreement with [the School Corporation].” Appellants’ App. at
293. School Corporation officials told ICI that this arrangement would expedite the project
because Foundation was a private organization and was not subject to public bidding laws.
Id. at 275. At the time of the October meeting, Foundation had neither been consulted with
nor advised about the proposal.
On November 2, 2010, ICI expressed interest in performing the renovation. School
Corporation did not solicit, meet with, or accept bids or proposals from any other contractor,
nor did it disclose at any public meeting its decision to select ICI to perform the renovation.
5
ICI was the only contractor School Corporation approached. By November 9, 2010, ICI was
meeting with officials of School Corporation and its attorney, Patrick Shoulders
(“Shoulders”), who indicated that he would provide a “bankable” term sheet to ICI. Id. at
297. Shoulders also indicated that he would work out a conflict of interest waiver so that he
could represent both the School Corporation and ICI. Id. On November 12, 2010, ICI sent
School Corporation a formal proposal offering to complete the project at a cost of
$6,585,318, plus a finance charge totaling $608,619 over the five-year payment schedule. Id.
at 19, 389. School Corporation agreed to this proposal without negotiating the price, and ICI
began work on the project in December 2010. Id. at 280; Appellants’ Br. at 7.
Also in December 2010, School Corporation approached Foundation about the
renovation project. School Corporation explained that it needed Foundation’s help with the
project because School Corporation “did not have the funds and because the Foundation,
unlike the School [Corporation], was not subject to public bidding laws.” Id. at 19. School
Corporation explained that it would buy the Building back from Foundation once the
renovation was complete. While Foundation had not participated in selecting ICI,
Foundation representatives indicated that they would cooperate.
In order to facilitate the renovation of the Building, ICI, Foundation, and School
Corporation, in various combinations, entered into six contracts. On December 13, 2010,
after seeking advice from independent counsel, Foundation entered into an “Agreement for
Purchase and Sale of Real Estate” (“Purchase Agreement”) with School Corporation, to
purchase the Building from School Corporation for one dollar. Appellants’ App. at 485-500.
6
On January 5, 2011, Foundation voted to approve the acquisition of Building from School
Corporation, id. at 941-42, and on January 19, 2011, School Corporation conveyed Building
to Foundation by “Special Warranty Deed” (“the Warranty Deed”). Id. at 944-48.
Foundation entered into a construction contract with ICI on January 21, 2011 (“the
Construction Contract”). Id. at 300-62. “The Foundation president indicated that he signed
the [Construction C]ontract but that he had no involvement in negotiating the contract, and
further indicated he was not aware how the School [Corporation] and ICI agreed on the
payment schedule, nor did he know how the School [Corporation] chose ICI to be the
contractor.” Id. at 20. Pursuant to the terms of the Construction Contract, ICI agreed to
finance the work performed on Building. In connection with that promise, Foundation
executed a promissory note (“the Promissory Note”) in ICI’s favor in the amount of
$6,585,318 plus five percent interest, to be paid in yearly installments over a period of five
years, as ICI had outlined in its formal renovation proposal to School Corporation. Id. at
446-47. Under the Promissory Note, the schedule of payments from Foundation to ICI was
as follows: $800,000 due on January 31, 2011, $1,600,000 due on January 31, 2012, and
$1,597,979 due annually on January 31 of years 2013 through 2015. Id. at 446. The
Promissory Note did not state the total cost of the project; however, when the Promissory
Note, including interest, is fully paid, Foundation will have paid $7,193,937 for the
renovation of the Building. The Promissory Note was secured by a mortgage on the property
in favor of ICI (“the Mortgage”). Id. at 514-20. The Mortgage was ICI’s security for the
7
payments owed by Foundation under both the Construction Contract and the Promissory
Note.
On January 24, 2011, three days after Foundation and ICI executed the Promissory
Note, School Corporation entered into an installment contract to repurchase the property
from Foundation (“the Installment Purchase Agreement”). Id. at 398-413. Under the terms
of the Installment Purchase Agreement, School Corporation had the right to inspect the
property during the renovation, and Foundation agreed “not to allow any changes in the
[Construction] Contract or the plans and specifications without the prior written consent of
[School Corporation].” Id. at 398. Additionally, the Installment Purchase Agreement set
forth a schedule of installment payments to be made by School Corporation to Foundation.
Appellants’ App. at 21, 413. The dates and amounts of School Corporation’s payments under
the Installment Purchase Agreement were identical to Foundation’s obligations to ICI under
the Promissory Note.
As additional security for Foundation’s obligations to ICI, on January 24, 2011,
Foundation collaterally assigned to ICI (“the Collateral Assignment”) Foundation’s right
under the Installment Purchase Agreement to receive payments from School Corporation in
the event Foundation defaulted on its payments under the Construction Contract to ICI.
Appellants’ App. at 21. An ICI official testified during a deposition that ICI would not have
entered into the Construction Contract with Foundation without the Promissory Note and the
Collateral Assignment as additional security. Id. at 21.
8
School Corporation paid Foundation the first installment of $800,000 on the date it
entered into the Installment Purchase Agreement. Id. at 21. About a week later, on January
31, 2011, Foundation paid $800,000 to ICI. Id. During a deposition, the president of
Foundation testified that he assum[ed] the Foundation made its $800,000 payment to ICI
using the same $800,000 that School Corporation had just paid to Foundation. Id.
On February 7, 2011, Contractors filed suit against School Corporation and
Foundation, seeking declaratory judgment and injunctive relief. Contractors subsequently
amended their complaint to include two claims. First, as taxpayers in School Corporation’s
district, Contractors alleged, pursuant to the Public Lawsuit Statute, Indiana Code chapter 34-
13-5, that the renovation should have been subject to public bidding. As potential bidders for
the renovation project, Contractors also alleged, pursuant to the Indiana Antitrust Act, that
School Corporation and Foundation engaged in a scheme to restrict the bidding for the
renovation project to just ICI. See Ind. Code § 24-1-2-3.
Contractors sought relief in the form of: (1) a declaration that “each of the agreements
used in furtherance of the scheme” was void because the project violated the public bidding
laws and were an illegal circumvention of the Antitrust Act; (2) injunctive relief precluding
the further expenditure of public funds on the transaction; (3) an order that School
Corporation and Foundation fully comply with a public records request; and (4) costs and
attorney fees. Appellants’ App. at 55.
On February 18, 2011, eleven days after filing their complaint, Contractors filed a
motion for preliminary injunction. Id. at 14. The Indiana Supreme Court appointed a special
9
judge for this proceeding on March 11, 2011, but that judge was unable to serve and a second
special judge was appointed March 31, 2011. Id. at 12, 13. The trial court set a hearing on
the preliminary injunction for July 1, 2011, but that hearing was vacated by agreement of the
parties because the renovation of the Building was complete. Appellants’ Br. at 3.
Contractors filed a motion for summary judgment in August 2011, and School
Corporation and Foundation each filed separate cross-motions for summary judgment.
Foundation also moved to strike certain materials filed by Contractors. The trial court heard
argument on the motions for summary judgment and the motion to strike on November 3,
2011, and denied the motion to strike that same day. Also on that day, a counterclaim,
previously filed by Foundation, was dismissed on Contractors’ motion.
After conducting a hearing, the trial court granted School Corporation’s and
Foundation’s motions for summary judgment and denied Contractors’ motion for summary
judgment, concluding, among other things, that the renovation project was not a public work
subject to competitive bidding requirements. The trial court’s reasoning was reflected in the
following conclusions:
11. This Court believes that while this transaction[] may smack of
‘favoritism most foul’ or may not pass the ‘smell test,’ each and every
individual transaction between the School [Corporation] and the Foundation,
and the Foundation and [ICI] are entirely legal and authorized by statutes.
12. The Court concludes that there is no violation of the law triggering a
violation of a public lawsuit statute as the work being done to property of the
Foundation renders this no longer a “public improvement” by a “municipal
Corporation” and, therefore, finds that summary judgment in favor of the
defendants as to any claim under the public lawsuit statute must be granted.
13. The Court does conclude[] that the renovation of the building is in fact
10
being financed with public funds and particularly finds that those public funds
are in fact traceable despite the contention by the School [Corporation] and the
Foundation that the funds paid by the School [Corporation] are then co-
mingled with the Foundation’s other funds, especially in light of the
synchronization of the payment schedules in the transactions at issue.
14. However, the Court concludes the public funds are not deposited to a
fund of a “municipal corporation” or “political subdivision” as it is undisputed
that the Foundation is neither.
15. Additionally, while the Court believes that there is no doubt that the
School [Corporation] engaged in the transaction in part to circumvent the
public bidding statutes, it is equally clear that those statutes do not apply to the
Foundation, and the School [Corporation] was entirely within its rights to
transfer the property to the Foundation, even for little or no consideration,
which is allowed by the statutes. (See I.C. 36-1-11-5.5)
16. Furthermore, as the parties agreed that intent or motive of the School
[Corporation] or the Foundation is not relevant or material to the Court’s
decision herein, the Court must conclude that the School [Corporation] and
Foundation were within their legal right to enter into these transactions and
that summary judgment in favor of the School [Corporation] and the
Foundation herein must be granted.
....
22. The project at issue is the renovation of a “public building” which was
owned before, and will be again after the renovation, by the School
[Corporation], which is a public entity under the definition of the statutes, and
the School [Corporation] is paying for the renovation with public money.
23. However, the transfer of the building to the Foundation takes the matter
out of the requirements for public bidding as the Foundation is not subject to
the public bidding requirements, and the transfer also takes the matter out of
the public lawsuit statutes for the reason that the Foundation is not a municipal
corporation.
24. The public bidding statutes do not apply unless the public work is
performed or contracted for by a political subdivision or their agencies,
regardless of whether it is performed on property owned or leased by the
political subdivision or agency. (I.C. § 36-1-12-1.) Here the property was
deeded to the Foundation who actually contracted for the work.
11
Appellants’ App. at 26.
Using the following language, the trial court also concluded that there was no
violation of the Antitrust Act:
As this Court concludes that for the above reasons the case does not meet the
criteria for a Public Lawsuit and finds no violation of the Public Bidding laws
under the facts of this case, the Court does not and can not find a scheme,
contract or combination to restrain or restrict bidding, as the series of
transactions at issue herein were “powers, rights, or privileges now existing or
conferred by law upon a person” to-wit the Foundation and the School
[Corporation]. Therefore, [Contractors’] Anti-Trust violation claims can not
[sic] succeed and summary judgment should be entered in favor of
[Foundation and School Corporation].
Id. at 29. Contractors now appeal.4
DISCUSSION AND DECISION
The parties here do not dispute the facts; instead, they disagree regarding the legal
effect of those facts. As such, the resolution of this case is particularly suited to summary
judgment.
When reviewing a grant or denial of a motion for summary judgment our well-
settled standard of review is the same as it is for the trial court: whether there
is a genuine issue of material fact, and whether the moving party is entitled to
judgment as a matter of law. Summary judgment should be granted only if the
evidence sanctioned by Indiana Trial Rule 56(C) shows that there is no
genuine issue of material fact and the moving party deserves judgment as a
matter of law. All factual inferences must be construed in favor of the non-
moving party, and all doubts as to the existence of a material issue must be
resolved against the moving party.
Kroger Co. v. Plonski, 930 N.E.2d 1, 4-5 (Ind. 2010) (citations omitted). The trial court’s
4
We commend the trial court on its thorough findings, which greatly facilitated our appellate review.
12
decision on summary judgment “‘enters appellate review clothed with a presumption of
validity.’” Trustcorp Mortg. Co. v. Metro Mortg. Co., Inc., 867 N.E.2d 203, 211 (Ind. Ct.
App. 2007) (quoting Malone v. Basey, 770 N.E.2d 846, 850 (Ind. Ct. App. 2002), trans.
denied). Moreover,
[a] grant of summary judgment may be affirmed upon any theory supported by
the designated evidence. While the trial court here entered specific findings of
fact and conclusions of law in its order granting summary judgment for the
appellees, such findings and conclusions are not required and, while they offer
valuable insight into the rationale for the judgment and facilitate our review,
we are not limited to reviewing the trial court’s reasons for granting or denying
summary judgment.
Van Kirk v. Miller, 869 N.E.2d 534, 539-40 (Ind. Ct. App. 2007) (citations omitted), trans.
denied. Our standard of review is not altered by the fact that the parties have filed cross-
motions for summary judgment, and we consider each motion separately to determine
whether the moving party is entitled to judgment as a matter of law. Alexander v. Marion
Cnty. Sheriff, 891 N.E.2d 87, 92 (Ind. Ct. App. 2008), trans. denied.
I. Mootness
Before addressing the merits, we must address Foundation’s contention that
Contractors’ claims are moot because the renovation project has been completed and because
no effective relief can be granted due to Contractors’ failure to join ICI as a party defendant.
As a general matter, courts decline to address the merits of moot claims. Horseman v. Keller,
841 N.E.2d 164, 170 (Ind. 2006). “A case becomes moot when it is no longer live and the
parties lack a legally cognizable interest in the outcome or when no effective relief can be
rendered to the parties.” Save Our Sch. Elmhurst High Sch. v. Fort Wayne Cmty. Sch., 951
13
N.E.2d 244, 246 (Ind. Ct. App. 2011), trans. denied. During the hearing on summary
judgment, Contractors’ attorney, Jon Laramore (“Laramore”), explained:
[O]bviously the plaintiffs know that they cannot undo the construction that’s
already been done at the [Building] and we do not want to undo it, it’s not our
purpose to penalize anybody who’s been involved in this transaction, . . . but
what we want is to keep this from happening again, if it’s happened once in
this format that goes around the public bidding laws, it could happen again.
This was an insider’s deal, only one contractor was contacted about doing this
work and our clients don’t want to be left on the outside when public bodies
decide to do work, they want to be able to solicit that work through bidding,
not just getting work when the person who is making the hiring decisions
happens to know about them.
Tr. at 10. This sentiment was repeated before this court during oral argument when
Laramore again stated that the issue before the court was not whether the Building should be
torn down; instead, Contractors were asking the court to decide a legal issue and set a
precedent concerning whether a school corporation or other municipal corporation can, in the
future, use the same method that School Corporation used to renovate the Building.
“Indiana courts recognize that a moot case can be reviewed under a public interest
exception when it involves questions of great public importance.” Ind. High Sch. Athletic
Ass’n, Inc. v. Durham, 748 N.E.2d 404, 411-12 (Ind. Ct. App. 2001) (citing Union Twp. Sch.
Corp. v. State ex rel. Joyce, 706 N.E.2d 183, 187 (Ind. Ct. App. 1998), trans. denied).
“Although Indiana does not require that the issue be capable of repetition, cases falling into
the public interest exception usually involve issues that are likely to recur.” Id. The issues of
competitive bidding and the expenditure of taxpayer money are undoubtedly matters of great
public interest. We also believe that similar issues are likely to recur in the future as school
corporations and other public entities seek alternative methods of achieving their public
14
purposes within tight budgetary constraints. Accordingly, we will address this case upon the
merits regardless of whether it is technically moot. See Save Our Sch., 951 N.E.2d at 246-47
(regardless of whether moot, court addressed question concerning closing of public school
for stated budgetary reasons because, as question of great public interest, it was likely to
recur).
II. Public Work
Contractors contend that a transaction like the one at issue constitutes a public work
under Indiana Code section 36-1-12-25 that is subject to the bidding laws under Indiana Code
chapter 36-1-12 (the “Public Work Statute”). The Indiana statutes that “provide for free and
open bidding on public work projects are designed to protect the rights of the public by
ensuring that the process be competitive.” Brooks v. Gariup Constr. Co., Inc., 722 N.E.2d
834, 839 (Ind. Ct. App. 1999), trans. denied. “The purpose behind competitive bidding
requirements is to safeguard the public against fraud, favoritism, graft, extravagance,
improvidence, and corruption and to ensure honest competition for the best work or supplies
at the lowest reasonable cost.” Gariup Constr. Co., Inc. v. Carras-Szany-Kuhn & Assocs.,
P.C., 945 N.E.2d 227, 235 (Ind. Ct. App. 2011), trans. denied (citing Schindler Elevator
Corp. v. Metro. Dev. Comm’n, 641 N.E.2d 653, 657 (Ind. Ct. App. 1994). “The confidence
5
Indiana Code section 36-1-12-2 provides:
As used in this chapter, “public work” means the construction, reconstruction, alteration, or
renovation of a public building, airport facility, or other structure that is paid for out of a
public fund or out of a special assessment. The term includes the construction, alteration, or
repair of a highway, street, alley, bridge, sewer, drain, or other improvement that is paid for
out of a public fund or out of a special assessment. The term also includes any public work
leased by a political subdivision under a lease containing an option to purchase.
15
of the public, as well as that of contractors who perform work for public agencies, is
dependent upon a school board’s compliance with the legal requirements of competitive
bidding.” Brooks, 722 N.E.2d at 839.
The Indiana General Assembly has provided a statutory right to enforce the public
work laws under two circumstances. Shook Heavy & Envtl. Constr. Grp., Div. of Shook, Inc.
v. City of Kokomo, 632 N.E.2d 355, 357 (Ind. 1994). First, the Public Lawsuit Statute,
Indiana Code chapter 34-13-5, “permits citizens or taxpayers of the municipality in question
to bring an action questioning the validity or construction of any public improvement by the
municipality.”6 Shook, 632 N.E.2d at 357-58.7 Second, the Indiana Antitrust Act, Indiana
Code section 24-1-2-7, “confers on private individuals the right to challenge the award of a
government contract where the governmental entity and successful bidder have engaged in
collusion or fraud.”8 Shook, 632 N.E.2d at 358. In City of Fort Wayne v. Pierce
Manufacturing, Inc., 853 N.E.2d 508, 517 (Ind. Ct. App. 2006), trans. denied, our court
reasserted that a citizen or taxpayer may challenge a public improvement under the Public
Lawsuit Statute, and an unsuccessful bidder may challenge the award of a government
6
For the purposes of the Public Lawsuit Statute, “public lawsuit,” in pertinent part, means:
any action in which the validity, location, wisdom, feasibility, extent, or character of
construction, financing, or leasing of a public improvement by a municipal corporation is
questioned directly or indirectly, including but not limited to suits for declaratory judgments
or injunctions to declare invalid or to enjoin the construction, financing, or leasing . . . .
Ind. Code § 34-6-2-124.
7
The Shook court analyzed the facts under Indiana Code chapter 34-4-17, which was repealed in 1998
but was reenacted as Indiana Code chapter 34–13–5 with only technical changes. City of Fort Wayne v. Pierce
Mfg., Inc., 853 N.E.2d 508, 517 (Ind. Ct. App. 2006), trans. denied.
16
contract in cases of collusion or fraud under the Indiana Antitrust Act. We address these
statutes in turn.
A. Public Lawsuit Statute
Contractors contend that the Building renovation was a public work project that was
contracted for in violation of the bidding requirements of the Public Work Statute, and as
such, the trial court erred in granting summary judgment in favor of School Corporation and
Foundation.
Contractors maintain that School Corporation renovated the Building “using a
technique not used before or since, a technique not contemplated by statute,” and that by
focusing on each step of their novel approach, rather than looking at the whole transaction,
School Corporation and Foundation tried “to camouflage the fact that they failed to comply
with fundamental statutory principles governing public bodies.” Appellants’ Reply Br. at 1.
Foundation and School Corporation respond that the six transactions in question were
authorized by the plain and unambiguous language of multiple Indiana statutes. These
statutes allowed: School Corporation to sell the Building as excess property, Ind. Code §§
20-26-7-1, 36-1-11-5.5; Foundation to purchase, own, hold, and improve the Building, Ind.
Code § 23-17-4-2; and School Corporation to acquire the Building back from Foundation,
Ind. Code § 36-1-4-5. Additionally, they maintain that nothing in the law required
Foundation, as a not-for-profit, to obtain bids on the renovation project prior to entering into
the Construction Contract with ICI. School Corporation and Foundation maintain that they
8
The Indiana Antitrust Act, Ind. Code § 24–1–2-7, has had only technical changes since Shook.
17
had a right to, and did, rely upon Indiana’s well-settled rule of statutory construction,
requiring courts to honor the plain and ordinary meaning of the language employed by the
legislature.
The Public Work Statute applies to “all public work performed or contracted for by:
(1) political subdivisions; and (2) their agencies; regardless of whether it is performed on
property owned or leased by the political subdivision or agency.” Ind. Code § 36-1-12-1.
“Public work” means the “construction, reconstruction, alteration, or renovation of a public
building . . . or other structure that is paid for out of a public fund or out of a special
assessment . . . . The term also includes any public work leased by a political subdivision
under a lease containing an option to purchase.” Ind. Code § 36-1-12-2 (emphasis added).
For purposes of public work projects, “public fund” includes “all funds that are: (A) derived
from the established revenue sources of a political subdivision or an agency of a political
subdivision; and (B) deposited in a general or special fund of a municipal corporation, or
another political subdivision or agency of a political subdivision.” Ind. Code § 36-1-12-
1.2(9) (emphasis added). “Political subdivision” means municipal corporation or special
taxing district. Ind. Code § 36-1-2-13. School Corporation falls within the definition of
“municipal corporation,” but Foundation does not. Ind. Code § 36-1-2-10. The importance
of these definitions is that a building project undertaken by School Corporation and using
public funds falls within the Public Work Statute and must be publicly bid; however, a
building project undertaken by Foundation and using private money does not.
Because the resolution of the issues presented turns on our interpretation of various
18
statutory provisions, a brief review of our rules of statutory interpretation is in order. Matters
of statutory interpretation present pure questions of law and are therefore reviewed de novo
on appeal. Alexander v. PSB Lending Corp., 800 N.E.2d 984, 995 (Ind. Ct. App. 2003).
“The first step in statutory interpretation is determining if the legislature has spoken clearly
and unambiguously on the point in question.” Siwinski v. Town of Ogden Dunes, 949 N.E.2d
825, 828 (Ind. 2011). If a statute is facially clear and unambiguous, “no room exists for
judicial construction.” Id. If a statute is susceptible to more than one interpretation,
however, it is deemed ambiguous and therefore open to judicial construction. City of N.
Vernon v. Jennings Nw. Reg’l Utils., 829 N.E.2d 1, 4 (Ind. 2005). When a statute is deemed
ambiguous, other well-established rules of statutory construction come into play. Id. “One
such rule is that our primary goal of statutory construction is to determine, give effect to, and
implement the intent of the Legislature.” Id. To that end, “we read the sections of an act
together in order that no part is rendered meaningless if it can be harmonized with the
remainder of the statute.” Id. Additionally, we review the statute as a whole and presume
that the legislature intended the statutory language to be applied logically and not to bring
about an unjust or absurd result. Penny v. Review Bd. of Ind. Dep’t of Workforce Dev., 852
N.E.2d 954, 960 (Ind. Ct. App. 2006), trans. denied. Finally, when interpreting statutes that
protect the public interest, courts of appeal must adopt construction best calculated to protect
public right as against individual right. Caston Sch. Corp. v. Phillips, 689 N.E.2d 1294, 1297
(Ind. Ct. App. 1998). Stated differently, this court is bound to construe legislation in such
way as to “oppose prejudice to public interest.” See State ex rel. Bynum v. LaPorte Superior
19
Court No. 1, 259 Ind. 647, 650, 291 N.E.2d 355, 356 (1973); State v. Kokomo Tube Co., 426
N.E.2d 1338, 1345 (Ind. Ct. App. 1981).
The Indiana General Assembly has enacted a comprehensive statutory scheme
regarding the manner in which a school corporation may contract and pay for public work,
Indiana Code chapter 36-1-12, or lease a school building from a building corporation
incorporated solely for the purpose of constructing or renovating the school building, Indiana
Code chapters 20-47-2 and 20-47-4.9 The former is governed by the Public Work Statute,
which applies to public work performed by political subdivisions and their agencies
regardless of whether that work would be performed on property owned or leased by the
political subdivision.10 Ind. Code § 36-1-12-1(a). When a public work project will cost at
least $150,000,11 the political subdivision must either enter into a design-build contract as
permitted under Indiana Code article 5-3012 or proceed pursuant to the Public Work Statute.13
Under the latter, a political subdivision must prepare general plans and specifications
9
In this area of the law, a building corporation is also referred to as a public or private holding
company. Ind. Code chapters 20-47-2, 20-47-3, 20-47-4.
10
This section was amended over time to exempt four specific kinds of entities, none of which is
pertinent to the facts before us.
11
The Public Work Statute also provides, “The cost of a single public work project may not be divided
into two (2) or more projects for the purpose of avoiding the requirement to solicit bids.” Ind. Code § 36-1-12-
19(b).
12
We do not address any factors pertaining to design-build contract, because the facts before us do not
support a claim that School Corporation or Foundation had any intention of entering into a design-build
contract.
13
The legislature has carved out some specific conditions regarding contracts to be performed for
professional engineering, architectural, or accounting services, Indiana Code section 36-1-12-5.
20
describing the work required, file the plan in a place reasonably accessible to the public, and
publish notice requesting sealed bids. Ind. Code § 36-1-12-4. The meeting for receiving bids
must be open to the public. Id. Thereafter, the political subdivision must either award the
bid to the lowest responsible and responsive bidder unless it explains the reason for awarding
it to another bidder or reject all bids. Id. “All plans and specifications for public buildings
must be approved by the state department of health, the division of fire and building safety,
and other state agencies designated by statute.” Ind. Code § 36-1-12-10. Through this
scheme, the public is allowed input into the need for the project and the political subdivision
is required to protect public funds by awarding the project to the lowest responsible and
responsive bidder.
Adding to the legislative and constitutional overlay regarding public work projects,
the funding available for building or renovating a public project, especially for a school
corporation, is also highly regulated. Indiana Code article 20-40 allows, and in some cases
requires, school corporations to establish certain funds. The Indiana Code lists at least
sixteen funds, including the general fund, Indiana Code chapter 20-40-2; capital projects
fund, Indiana Code chapter 20-40-8; and debt service fund, Indiana Code chapter 20-40-9.
These funds are regulated both as to the manner in which money can be deposited into them
and as to the things for which money can be spent from them. For example, money in a
capital projects fund may be used to pay for planned construction, repair, replacement, or
remodeling; site acquisition; site development; and repair, replacement, or site acquisition
that is necessitated by an emergency. Ind. Code § 20-40-8-10. Money in a capital projects
21
fund may also be used to pay for “leasing or renting existing real estate,” but not for
payments authorized under Indiana Code chapter 20-47-2 for lease purchase agreements.
Ind. Code § 20-40-8-15. Instead, a school corporation is authorized to make lease rental
obligations under Indiana Code chapter 20-47-2 from the debt service fund. Ind. Code § 20-
40-9-8.
The Indiana Constitution also impacts the manner in which a school corporation may
spend public money for public work. Indiana has a constitutional debt limit which provides,
“No political or municipal corporation in this State shall ever become indebted, in any
manner or for any purpose, to an amount, in the aggregate, exceeding two per centum on the
value of the taxable property within such corporation.” See Ind. Const. Art. 13, § 1. A
constitutional debt limit “place[s] constraints on governmental borrowing power to protect
present and future taxpayers from the excesses of legislative fiscal irresponsibility.” Reuven
Mark Bisk, State and Municipal Lease—Purchase Agreements: A Reassessment, 7 Harv.
J.L. & Pub. Pol’y, 521 (1984). This means that government entities must struggle both to
“fulfill their governmental responsibilities and avoid violating debt limitations.” Id.
“Elected officials across the country have attempted to resolve this conflict through a variety
of leasing arrangements, including lease-purchasing.” Id. Critics of this method, however,
contend that:
[L]ease-purchase agreements [are] a transparent subterfuge of debt limitations.
They contend that leasing is in substance no different from constitutionally
restricted general obligation debt. Under a broad reading of state
constitutional provisions lease-purchasing seems to effectively frustrate the
purpose, if not the letter or original scope, of debt limitations. The public,
these critics argue, is left saddled with an even greater indebtedness paid for
22
with even higher interest charges. . . .
Id. at 522.
The Indiana General Assembly, however, has authorized this alternative means for a
school corporation to obtain a renovated building by allowing: (1) school corporations to
enter into lease-purchase agreements with public holding companies pursuant to Indiana
Code chapter 20-47-2; (2) school corporations to enter into lease-purchase agreements with
private holding companies pursuant to Indiana Code chapter 20-47-3; and (3) school
corporations to enter into a lease-purchase agreement where the subject property is an
existing, improved school building, Indiana Code chapter 20-47-4. Under each chapter, the
construction or renovation of the subject property has to be financed and completed by a
building corporation, incorporated for that specific purpose. Where the school corporation
engages in a lease-purchase of an existing building, under Indiana Code chapter 20-47-4, the
school corporation must comply with Indiana Code chapter 20-47-2 or chapter 20-47-3, and
if required, comply with certain petition and remonstrance provisions and local public
question provisions. Ind. Code § 20-47-4-6(a). Additionally, Indiana Code section 20-47-4-
6(c) specifically provides, “Lease rental payments made under the lease do not constitute a
debt of the school corporation for purposes of the Constitution of the State of Indiana.”
The Indiana General Assembly created a comprehensive statutory scheme that would
have allowed School Corporation to renovate Building through the Public Work Statute or
acquire the renovated Building through a lease-purchase agreement with a building
corporation. Had this been a public work project, the School Corporation would have been
23
required to: prepare general plans and specifications describing the work required; file the
plan in a place reasonably accessible to the public; publish notice requesting sealed bids; hold
an open meeting to receive the bids; and then either award the bid to the lowest responsible
and responsive bidder unless it explains the reason for awarding it to another bidder, or reject
all bids. Ind. Code §36-1-12-4. The plans and specifications for the Building would have
required approval “by the state department of health, the division of fire and building safety,
and other state agencies designated by statute.” Ind. Code § 36-1-12-10.
As a lease-purchase agreement, School Corporation would have had to comply with
all applicable provisions of Indiana Code chapter 20-47-2. Ind. Code § 20-47-4-8. The
renovation of the Building could only have been performed by a building corporation
incorporated solely for that purpose—Foundation is not such a building corporation. Ind.
Code § 20-47-2-6(a). The building corporation, acting without profit, could have expected
only the return of expended capital plus five percent interest. Ind. Code § 20-47-2-6(b).
Before School Corporation could execute the lease it would have had to hold a public
meeting on the terms of the lease, file a notice of the execution of the lease, and submit the
plans and specifications for the improvement for approval by state agencies designated in
Indiana Code chapter 20-47-2. Ind. Code § 20-47-4-8. Under a building corporation lease
the School Corporation could not have made any lease payments until the renovated property
was ready for occupancy. Ind. Code §20-47-2-10. Finally, in anticipation of the renovation,
the School Corporation, like here, could have transferred the Building to a building
corporation; however, this could have been accomplished only after three appraisers (one of
24
whom is a disinterested freeholder of School Corporation) determine the fair market value of
the land. Ind. Code §§ 20-47-2-15, 20-47-4-9. Thereafter, the School Corporation could
have sold the land to the building corporation for not less than the amount fixed as the fair
market value. Id.In both schemes, the public trust would be protected. Either there is public notice and
public bidding for the construction or renovation of school property, or there is an
arrangement with an entity incorporated as a building corporation for the purpose of
renovating the property and leasing it back. In the former, the public is protected because the
school corporation must take the lowest, most responsive bid or explain why it acted
otherwise. The project is paid for out of the capital projects fund. In the latter, public input
is entertained regarding the fairness of the terms of the lease, the property is built or
renovated by a corporation that is operating on a not-for-profit basis, and the school
corporation land that is used for the project is transferred to the building corporation at its
fair market value. In both cases, the building plans are submitted to the department of health,
state fire marshal, and other agencies designated by statute. Ind. Code §§ 20-47-2-8, 36-1-
12-10.
While it is the policy of the State of Indiana “to grant to each school corporation all
the powers needed for the effective operation of the school corporation,” Ind. Code § 20-26-
3-1, the General Assembly has specifically stated, “If there is a constitutional or statutory
provision requiring a specific manner for exercising a power, a school corporation that
exercises the power shall exercise the power in the specified manner as a minimum
25
requirement.” Ind. Code § 20-26-3-5(a). Here, School Corporation and Foundation did not
follow either of these integrated legislative schemes. Instead, they entered into what they
contend were six separate transactions to accomplish their goal of renovating the Building
with public money, yet evading public scrutiny and input. School Corporation and
Foundation cite to various parts of the Indiana Code to support their contention that each
transaction was legal. The fact remains, however, that, notwithstanding the six contracts,
this was one transaction—the renovation of a building owned and paid for by School
Corporation using public funds. This was School Corporation’s project and not Foundation’s
project. Here, the decision to renovate the Building originated with School Corporation in
late 2009. Hafer was hired by School Corporation and the architectural plans were designed
for and overseen by School Corporation. School Corporation engaged in talks with ICI
regarding the cost of the project and did not negotiate the price. Foundation did not even
know about the project until late in 2010.
School Corporation seems to have modeled its transaction after a lease-purchase
agreement under Indiana Code chapter 20-47-4. However, structuring the transaction around
Foundation instead of a building corporation, and maintaining that it has entered into an
Installment Purchase Agreement instead of a lease-purchase agreement, School Corporation
contends it has created a new way to renovate Building that falls outside both the Public
Work Statutes and the provisions covering lease purchase agreements. The problem that
arises is that the School Corporation’s method of using public funds to accomplish its
renovation without complying with public bidding laws has not been authorized by our
26
General Assembly.
The School Corporation’s methodology may also fail to protect the public interest.
For example, as a lease-purchase transaction, School Corporation could have only transferred
the Building to a building corporation for fair market value. Ind. Code §§ 20-47-2-15(3), 20-
47-3-13(3). Here, the trial court noted that around the time School Corporation transferred
the Building to Foundation for one dollar, it was appraised by Bartlett and Associates, Inc. at
$2,300,000. Appellants’ App. at 20. Prior to the renovation, David Matthews and Associates
gave an appraisal that the Building, once renovated, would be worth $7,900,000, while
Bartlett gave an appraisal that the Building would be worth $6,500,000. Id. The trial court
was puzzled about the economic rationale behind renovating the building by this method,
noting, “[I]n addition to transferring a $2 million building for one dollar, the School
Corporation is expending over $7 million to get a building back worth [$]6.5 million to
[$]7.25 million.” Id.We are bound to construe legislation in such way as to “oppose prejudice to public
interest.” See Bynum, 259 Ind. at 650, 291 N.E.2d at 356; Kokomo Tube Co., 426 N.E.2d at
1345. That goal would be undermined if we were to dissect the renovation project into six
artificial pieces that avoid the scrutiny of public evaluation and the safeguards protecting
public money, when the renovation is, in fact, one integrated project. School Corporation
accomplished the renovation by (1) hiring Hafer architect who drew up architectural plans to
School Corporation’s specifications; (2) hiring ICI to do the work; (3) transferring the
Building to Foundation for $1; (4) using their own attorney to draft the contract between
27
Foundation and ICI, as well as other documents securing the project’s financing such as the
Mortgage, Promissory Note, and Assignment; (5) agreeing to buy back the building from
Foundation for the exact price and on the same schedule that the Foundation was paying ICI;
and (6) supervising the actual construction. Appellants’ App. at 285, 278, 159, 281-82, 398-
415, 398-99. The trial court concluded, and we agree, that School Corporation “selected a
contractor to renovate a public building according to plans prepared by an architect selected
by the School and fully intended to pay for the project and in fact is paying for the project
with public funds, without following the public bidding laws.” Id. This scheme has not been
authorized by our General Assembly and, indeed, violates the public bidding laws that it has
enacted. 14
B. Antitrust Act
The trial court concluded that there was no violation of the Antitrust Act because it
found no violation of the Public Bidding Laws, stating:
As this Court concludes that for the above reasons the case does not meet the
criteria for a Public Lawsuit and finds no violation of the Public Bidding laws
under the facts of this case, the Court does not and can not find a scheme,
contract or combination to restrain or restrict bidding, as the series of
transactions at issue herein were “powers, rights, or privileges now existing or
conferred by law upon a person” to-wit the Foundation and the School
[Corporation]. Therefore, [Contractors’] Anti-Trust violation claims can not
[sic] succeed and summary judgment should be entered in favor of
[Foundation and School Corporation].
14
School Corporation and Foundation contend that each of the transactions entered into to accomplish
the renovation of the building was legal. Judge Pyle specifically asked the parties at oral argument whether the
initial transaction—the transfer of property from School Corporation to Foundation—was a legal transaction.
Deciding as we do that School Corporation failed to follow the overarching statutory scheme for renovating
Building, we make no decision regarding the question of whether the transfer of property to the Foundation or
any of the other alleged separate transactions was in fact legal.
28
Id. at 29. Because we hold that the scheme utilized by the School Corporation and the
Foundation did, indeed, violate the Public Bidding Laws, we vacate the trial court’s judgment
and remand for further proceedings consistent with this decision.
Reversed and remanded with instructions.
PYLE, J., concurs.
FRIEDLANDER, J., dissents with separate opinion.
29
IN THE
COURT OF APPEALS OF INDIANA
ALVA ELECTRIC, et al )
)
Appellants-Plaintiffs, )
)
vs. ) No. 82A01-1201-PL-2
)
EVANSVILLE VANDERBURGH SCHOOL )
CORPORATION and EVSC FOUNDATION, INC., )
)
Appellees - Defendants. )
)
FRIEDLANDER, Judge, dissenting
Because I believe the actions of School Corporation and Foundation were lawful and
not subject to competitive bidding procedures, I respectfully dissent.15
Contractors do not argue, and the Majority does not conclude, that any individual
contract entered into or step taken by School Corporation or Foundation was unlawful.
Indeed, at oral argument, counsel for Contractors expressly conceded that each of the six
15
Additionally, I briefly note that I would not be so quick to dismiss Foundation’s mootness argument
on the basis of the public interest exception. If the facts of this case are as anomalous as Contractors would
have us believe, I am uncertain that this case truly presents a matter of great public importance or one that is
likely to recur. Moreover, I am troubled by Contractors’ request that we “set a precedent concerning whether a
school corporation or other municipal corporation can, in the future, use the same method that School
Corporation used to renovate the Building.” Slip Op. at 14. I believe this is tantamount to a request for an
advisory opinion, which we ordinarily decline to issue. See Mosley v. State, 908 N.E.2d 599 (Ind. 2009).
30
contracts was legal. Nevertheless, the Majority concludes that “notwithstanding the six
contracts, this was one transaction—the renovation of a building owned and paid for by
School Corporation using public funds.” Slip Op. at 26. The Majority’s conclusion is based
upon School Corporation’s heavy involvement in and control over the renovation project
from its inception to its completion, and the existence of alternative methods by which
School Corporation could have accomplished the renovation which would have required
public bidding or compliance with other statutory requirements.
I am unconvinced that the series of concededly lawful transactions at issue in this case
adds up to a violation of the Public Bidding Laws or the Antitrust Act. Unlike the Majority, I
see nothing “artificial” in viewing each of the contracts as a distinct step, and I do not believe
that the mere existence of other methods by which School Corporation could have carried out
the renovation without the Foundation’s help equates to a mandate that it do so.16 Id. at 27.
Rather, for the reasons explained below, I believe that the series of lawful transactions at
issue in this case is, when viewed in the aggregate, entirely lawful.
I am of the opinion that this case can be resolved based on the plain language of the
relevant statutes. Unless specifically excluded, the Public Work Statute applies to “all public
work performed or contracted for by” political subdivisions and their agencies, “regardless of
whether it is performed on property owned or leased by the political subdivision or agency.”
I.C. § 36-1-12-1(a). “Public work” is defined in relevant part as “the construction,
16
I believe that Contractors’ and the Majority’s reliance on I.C. § 20-26-3-5, which provides that “[i]f
there is a constitutional or statutory provision requiring a specific manner for exercising a power, a school
corporation that exercises the power shall exercise the power in the specified manner as a minimum
requirement” is misplaced. The Majority’s analysis in this regard assumes it was School Corporation that
carried out the renovation project, which begs the question, in my opinion.
reconstruction, alteration, or renovation of a public building . . . that is paid for out of a
public fund or out of a special assessment.” I.C. § 36-1-12-2. Thus, to be subject to the
competitive bidding procedures set forth in the Public Work Statute, the renovation at issue
here must have been performed or contracted for by a political subdivision or its agency and
paid for out of a public fund or special assessment. I believe neither of these requirements
was satisfied in this case.
Although School Corporation exerted considerable control over the renovation
project, Foundation was the only entity that contracted with ICI to carry out the project. It is
my belief that the plain language of I.C. § 36-1-12-1(a), which provides that the Public Work
Statute applies to public work performed or contracted for by a political subdivision or its
agency, does not cover contracts entered into by private entities like Foundation—even if
those contracts are entered into for the ultimate benefit of and in cooperation with a political
subdivision like School Corporation.
Additionally, regardless of its intended use, a project or structure is not subject to the
Public Work Statute unless it is paid for out of a public fund or special assessment. This
requirement reflects the purpose behind the Public Work Statute, i.e., wise stewardship of
public funds. There is no indication that any special assessment was levied in relation to the
renovation project; the relevant question is therefore whether the renovation project is being
paid for out of a “public fund.”
Contractors argue that the renovation project is being paid for out of a public fund
because, under the installment purchase agreement, School Corporation makes payments to
32
Foundation in precisely the same amounts and on precisely the same dates as Foundation
makes payments to ICI. Put another way, the Contractors assert that the renovation is being
paid for out of a public fund because Foundation obtains all of the money it uses to pay ICI
from School Corporation, and the transfer of the funds from School Corporation to
Foundation does nothing to alter the character of those funds. The Contractors argue that in
order to conclude that the renovation project is not being paid for out of a public fund, this
court would be required to “overlook the obvious” and “check its common sense at the door.”
Reply Brief at 13. It is telling, however, that Contractors never discuss the statutory
definition of “public fund” in their analysis of this issue.
The General Assembly has defined the phrase “public fund” to mean all funds that
are:
(A) derived from the established revenue sources of a political subdivision
or an agency of a political subdivision; and
(B) deposited in a general or special fund of a municipal corporation, or
another political subdivision or agency of a political subdivision.
I.C. § 36-1-12-1.2(9). Two general observations can be drawn from this statutory language.
First, the definition is written in the conjunctive; both elements must be satisfied for the
funds to be considered “public” for the purposes of the statute. Second, the statute’s
requirement that the funds be “deposited in a general or special fund” of a political
subdivision indicates that the origin of the funds is not the only relevant consideration; the
funds must also be held by a municipal corporation or political subdivision.
Here, even if it can be said that the funds used to pay for the renovation were
“derived” from School Corporation’s established revenue sources, those funds are not
33
“deposited in a general or special fund of a . . . political subdivision.” See I.C. § 36-1-12-1.2.
Once the funds are transferred to Foundation, they are no longer part of a public fund
because they are no longer held by a political subdivision. In other words, the public dollar is
spent only once—when School Corporation makes payment to Foundation. The
interpretation urged by the Contractors, and implicitly accepted by the Majority, effectively
reads the second element out of the statute. Perhaps I.C. § 36-1-12-1.2(9) provides a narrow
definition of public fund, but it is the definition our General Assembly has prescribed, and
we are not at liberty to expand it.
Because I believe that the unambiguous statutory language at issue here precludes us
from engaging in statutory construction, I think that discussion of legislative intent and
public policy is unnecessary. Nevertheless, in light of Contractors’ insistence that a broader
construction of the Public Bidding Laws is required in order to effectuate legislative intent
and protect the policies behind the laws, I briefly note that there is a countervailing policy at
work here that has not been discussed by the parties or the Majority.
Across the state of Indiana, numerous private foundations exist to provide support to
public and private educational institutions. These charitable foundations provide educational
institutions with a number of resources and, in so doing, aid them in reaching their
educational objectives. Such public-private cooperation is nothing new, and it is beneficial
to the citizens of Indiana because it enhances the quality of our public educational system
while easing the burden on taxpayers. If the General Assembly wished to place the sorts of
limitations on public-private cooperation as the Majority’s opinion suggests, I believe it
34
would have done so expressly. Moreover, I believe that today’s opinion creates uncertainty
for private foundations regarding the extent of support they may provide for public
educational institutions before becoming subject to Public Bidding Laws. I believe the
attendant risk of incurring liability for failure to comply with these laws, which were
designed to apply only to public institutions, may significantly chill private educational
foundations’ willingness to provide resources for the benefit of public educational
institutions. For all of these reasons, I disagree with the Majority’s holding and would affirm
the trial court’s order granting summary judgment.
35