Court Opinion

ID: 9897214
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:08:44.636801+00
Date Added: 2024-06-11T09:15:39.883187
License: Public Domain

FILED
                                                         Jun 28 2023, 1:49 pm

                                                             CLERK
                                                         Indiana Supreme Court
                                                            Court of Appeals
                                                              and Tax Court

                     IN THE

Indiana Supreme Court
         Supreme Court Case No. 23S-CP-59

         Performance Services, Inc.,
                       Appellant

                          –v–

 Randolph Eastern School Corporation,
                        Appellee

     Argued: April 27, 2023 | Decided: June 28, 2023

        Appeal from the Randolph Circuit Court
                 No. 68C01-2102-PL-87
   The Honorable Marianne L. Vorhees, Special Judge

On Petition to Transfer from the Indiana Court of Appeals
                    No. 22A-CP-361

            Opinion by Chief Justice Rush
   Justices Massa, Slaughter, Goff, and Molter concur.
Rush, Chief Justice.

   An old proverb provides that those who sow the wind shall reap the
whirlwind. This observation that actions have consequences is
particularly apt when, as here, a company contracts with a school
corporation for a wind-turbine project. Although Indiana law affords
school corporations significant authority, their ability to invest public
funds is limited by statute. And if they exceed their statutory authority
when contracting with a company, the contract is void and unenforceable.

   Here, a school corporation contractually agreed to make biannual
payments to a company for access to a wind turbine. And in that contract,
the company agreed to provide the school corporation with financial
benefits tied to the turbine’s net revenue. We hold that the contract
constitutes an unauthorized investment under Indiana law, rendering the
contract void and unenforceable. We therefore affirm the trial court’s
grant of summary judgment to the school corporation.

Facts and Procedural History
   In 2008, Performance Services, Inc. approached Randolph Eastern
School Corporation (RESC) about constructing a wind turbine. Following
school-board approval the following year, the parties entered into a
contract to undertake the project.

   Performance agreed to construct and operate the turbine, sell the
generated power and renewable energy credits on the open market, “pay
all costs of operating, maintaining and insuring” the turbine, receive the
applicable tax credits, and provide RESC with access to the turbine for
educational purposes. “In exchange for such access,” RESC agreed to pay
Performance $77,000 biannually, and the school corporation would receive
“a credit against each payment” in an amount based on a percentage of
the turbine’s net revenue. Additionally, if the net revenue exceeded the
payment, Performance agreed to place the first $10,000 in an “operating
reserve account” and then remit to RESC any excess amounts.

  As RESC’s then-superintendent explained, if the project performed “as
expected,” the school corporation would receive “a surplus each year,”

Indiana Supreme Court | Case No. 23S-CP-59 | June 28, 2023        Page 2 of 9
ultimately equaling “$3.1 million over and above the payments” at the
end of twenty-five years. The parties subsequently twice amended the
contract—first to specify the payments would continue for twenty years,
and second to alter the payment due dates.

   Following execution of the contract and its amendments, the State
Board of Accounts (SBOA) informed Performance that school corporations
lack the statutory authority to invest in a wind-turbine project. The SBOA
also conveyed this position to all state public school corporations,
cautioning against undertaking such projects as a way to generate extra
revenue. Later, in auditing RESC, the SBOA determined the school
corporation “invested in a wind turbine in 2009,” characterizing the
project as an investment “not authorized by statute” and noting that RESC
“did not receive any of its energy needs from the wind turbine.”

   RESC ultimately never made any payments to Performance despite
receiving invoices in 2016 and 2021. Shortly after receiving the second
invoice, RESC brought a declaratory judgment action seeking to void the
contract, alleging in part that it constituted an illegal investment. In
response, Performance asserted the contract was “legally valid and
binding,” and it also filed counterclaims. RESC moved for summary
judgment on all claims and counterclaims, again contending the contract
was “unenforceable because RESC lacked the statutory authority to invest
in any wind turbine project.” Performance maintained the contract’s
legality and moved for partial summary judgment on its counterclaims for
breach of contract and suit on account.

   Following a hearing, the trial court granted RESC’s motion for
summary judgment and denied Performance’s cross-motion for summary
judgment. The trial court concluded the contract was void and
unenforceable, reasoning it constituted an unauthorized investment.
Performance appealed.

   A divided panel of our Court of Appeals reversed. Performance Servs.,
Inc. v. Randolph E. Sch. Corp., 196 N.E.3d 208, 210 (Ind. Ct. App. 2022). The
majority reasoned, in relevant part, that the contract was not for an
investment because the parties’ relationship “never amounted to more
than the School Corporation owing payments for services rendered by

Indiana Supreme Court | Case No. 23S-CP-59 | June 28, 2023           Page 3 of 9
Performance.” Id. at 216. Judge Brown dissented, believing the contract
“reflects an illegal investment . . . in which the School Corporation sought
a financial return.” Id. at 221 (Brown, J., dissenting).

  RESC petitioned for transfer, which we granted, vacating the Court of
Appeals’ opinion. Ind. Appellate Rule 58(A). 1

Standard of Review
   We review summary judgment decisions de novo, using the same
standard as the trial court. Griffin v. Menard, Inc., 175 N.E.3d 811, 812 (Ind.
2021). Summary judgment is appropriate only if the designated evidence
“shows that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” Ind. Trial Rule
56(C). Here, the parties agree there are no disputed issues of material fact.
Thus, the sole issue is whether the contract is illegal as a matter of law.
Resolving this issue requires us to engage in both statutory and contract
interpretation—exercises we undertake de novo. Lake Imaging, LLC v.
Franciscan All., Inc., 182 N.E.3d 203, 206 (Ind. 2022).

Discussion and Decision
   Contracting parties generally have broad latitude to bind themselves to
specific terms. Care Grp. Heart Hosp., LLC v. Sawyer, 93 N.E.3d 745, 749
(Ind. 2018). But that latitude is restricted by statute when one of the parties
is a governmental entity, such as a school corporation. See City of Frankfort
v. Logan, 168 Ind. App. 81, 341 N.E.2d 510, 514 (1976). Indeed, if these
entities exceed their statutory authority, the contract is void and
unenforceable “no matter what hardship it may work, or how strong the
equities may appear.” Pipe Creek School Twp. v. Hawkins, 49 Ind. App. 595,

1 We summarily affirm the portion of the Court of Appeals’ opinion holding that the trial

court did not abuse its discretion in denying Performance’s motion to strike RESC’s
designated evidence from the SBOA. See App. R. 58(A)(2).

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97 N.E. 936, 937 (1912); see also Bd. of Sch. Comm’rs of City of Indianapolis v.
State ex rel. Wolfolk, 209 Ind. 498, 199 N.E. 569, 572 (1936). Thus, regardless
of how attractive a project may be, private parties must pay close attention
to the laws limiting a governmental entity’s authority when contracting
with them. Peoples State Bank v. Benton Twp., 28 N.E.3d 317, 324 (Ind. Ct.
App. 2015).

   Our Legislature has imposed such limits on school corporations in
Indiana’s Home Rule and Public Investment Acts. In relevant part, the
Home Rule Act withholds from school corporations “[t]he power to invest
money, except as expressly granted by statute.” Ind. Code § 36-1-3-
8(a)(11); see also id. § 20-26-3-7(1). And while the Public Investment Act
grants school corporations the power to invest public funds in various
ways, a wind turbine is not one of them. See I.C. ch. 5-13-9.

   Relying on these statutes, RESC argues its contract with Performance is
void because the school corporation exceeded its authority by investing
money in the wind-turbine project “to earn a financial return.”
Performance, on the other hand, asserts that RESC’s payments were “not
tied to any financial return” but were instead to provide “physical access
to the wind turbine as well as access to the turbine’s data for educational
and vocational training purposes.” We agree with RESC.

   We first hold that the statutorily undefined term “invest” in the Home
Rule and Public Investment Acts means to commit money in hopes of
obtaining a financial return. We then apply that definition and conclude
the contract between RESC and Performance was an illegal investment by
a school corporation because RESC in part sought to reap a financial
benefit. Because RESC was not statutorily authorized to invest public
funds in this way, we hold the contract is void and unenforceable as a
matter of law. We therefore affirm the trial court’s grant of summary
judgment to RESC.

Indiana Supreme Court | Case No. 23S-CP-59 | June 28, 2023             Page 5 of 9
I. Under Indiana’s Home Rule and Public
   Investment Acts, “invest” means to commit money
   in hopes of obtaining a financial return.
   The parties acknowledge that neither the Home Rule Act nor the Public
Investment Act define the term “invest,” so each supplies its own
definition. RESC directs us to the definition of “invest” in Black’s Law
Dictionary, while Performance urges us to use the four-part test for an
“investment contract” applicable in the context of securities law, see S.E.C.
v. W.J. Howey Co., 328 U.S. 293, 298–99 (1946). Each party’s position misses
the mark.

   When a statutory term is undefined, our Legislature has instructed “us
to interpret the term using its ‘plain, or ordinary and usual, sense.’”
Rainbow Realty Grp., Inc. v. Carter, 131 N.E.3d 168, 174 (Ind. 2019) (quoting
I.C. § 1-1-4-1(1)). In doing so, we “generally avoid legal or other
specialized dictionaries,” turning “instead to general-language
dictionaries.” Id. One such dictionary defines “invest” as “to put (money)
to use, by purchase or expenditure, in something offering potential
profitable returns, as interest, income, or appreciation in value.” Webster’s
Unabridged Dictionary 1004 (2d ed. 2001). Another similarly defines
“invest” as “[t]o commit (money or capital) in order to gain a financial
return.” The American Heritage Dictionary,
https://www.ahdictionary.com/word/search.html?q=invest (last visited
June 28, 2023).

   Until our Legislature provides otherwise, we adopt these definitions of
“invest” for purposes of the Home Rule and Public Investment Acts. We
thus understand “invest” as used in those Acts to mean committing
money in hopes of obtaining a financial return. We now apply this
definition here.

Indiana Supreme Court | Case No. 23S-CP-59 | June 28, 2023           Page 6 of 9
II. Because RESC contracted to invest in the turbine,
    the contract is void and unenforceable.
   The question is whether, under the parties’ contract, RESC agreed to
commit money in hopes of obtaining a financial return. Recall that RESC
agreed to pay Performance $77,000 biannually in exchange for access to
the turbine and its data for educational purposes. According to
Performance, RESC agreed to make payments in exchange for this
tangible benefit and, thus, did not “invest” any money. However, we
ascertain the parties’ intent by reviewing the contract in its entirety.
Sawyer, 93 N.E.3d at 752. And doing so here demonstrates RESC
committed to paying up to $154,000 annually for twenty years in part with
the expectation of obtaining a financial return.

   Specifically, section 2 of the contract reveals Performance would treat
RESC’s payments as revenue—just like the profits Performance would
earn from its sale of power generated by the turbine and its sale of
renewable energy credits—to be used to “pay all costs of operating,
maintaining and insuring the Facility.” And section 5 entitled RESC to “a
credit against each payment in the amount of the net revenues
experienced by [Performance] in the operation of” the turbine during each
six-month period. For the first six years, RESC’s credit would be 100% of
the net revenue, with the percentage for the following years fluctuating
between 25% and 75%. Additionally, if the “net revenues exceed[ed] the
amount of the payment due from” RESC, Performance agreed to deposit
“$3500 per year into an operating reserve account” until the balance
reached $10,000. Performance would then remit to RESC “[a]ny net
revenues not needed for deposit in the operating reserve account . . . in the
form of payment in lieu of taxes.” Thus, under the contract, RESC
committed money to Performance that it would use to sell power and
renewable energy credits and then convert those sales into financial
benefits for RESC.

   While we recognize that RESC’s access to the turbine constitutes an
immediate, tangible benefit, this benefit does not preclude the contract
from also constituting an investment. Indeed, the contract contemplated
that RESC’s payment would vary depending on the turbine’s financial

Indiana Supreme Court | Case No. 23S-CP-59 | June 28, 2023          Page 7 of 9
performance. And the contract also entitled RESC to excess net revenue
generated by the turbine. Simply put, though RESC committed money to
Performance in exchange for access to the turbine, RESC also committed
money in hopes of obtaining a financial return. As a result, we conclude
the contract constitutes an illegal investment by a school corporation
under the Home Rule Act and the Public Investment Act. And we decline
to address whether the offending portions of the contract are severable as
neither party, at any stage, has ever taken that position. Cf. Harbour v.
Arelco, Inc., 678 N.E.2d 381, 385 & n.4 (Ind. 1997). This is not surprising, as
the record is simply devoid of evidence that the parties would have
executed the agreement but for RESC’s potential to reap financial benefits.
Thus, we hold the contract is void and unenforceable. RESC is therefore
entitled to judgment as a matter of law.

Conclusion
   Because the contract between RESC and Performance constituted an
investment unauthorized by statute, the contract is void and
unenforceable. We therefore affirm the trial court’s grant of summary
judgment to RESC.2

Massa, Slaughter, Goff, and Molter, JJ., concur.

2   We thank amicus curiae Indiana School Boards Association for its helpful brief.

Indiana Supreme Court | Case No. 23S-CP-59 | June 28, 2023                            Page 8 of 9
ATTORNEYS FOR APPELLANT
William E. Kelley, Jr.
Sean T. Devenney
Drewry Simmons Vornehm, LLP
Carmel, Indiana

ATTORNEYS FOR APPELLEE
Robert W. Rund
Joseph P. Rompala
James E. Zoccola
Matthew S. Tarkington
Lewis & Kappes, P.C.
Indianapolis, Indiana

ATTORNEY FOR AMICUS CURIAE INDIANA SCHOOL BOARDS
ASSOCIATION
Kent M. Frandsen
Parr Richey Frandsen Patterson Kruse LLP
Lebanon, Indiana

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