Court Opinion

ID: 2784677
Source: CourtListenerOpinion
Date Created: 2015-03-09 14:03:12.115808+00
Date Added: 2024-06-11T11:03:01.530785
License: Public Domain

Mar 09 2015, 9:15 am

ATTORNEYS FOR APPELLANTS                                   ATTORNEYS FOR APPELLEE
Elizabeth M. Bartolucci                                    Heather M. Crockett
Heather Keil                                               Kurt D. Hammel
O’Hagan LLC                                                John Edward Frank
Chicago Illinois                                           Office of the Indiana Attorney General
                                                           Indianapolis, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Manuel Montalvo, et. al.,                                 March 9, 2015

Appellants-Defendants,                                    Court of Appeals Case No.
                                                          45A03-1312-PL-495
        v.                                                Appeal from the Lake Superior Court
                                                          The Honorable John R. Pera, Judge
                                                          Case No. 45D10-1204-PL-31
State of Indiana, ex rel.
Gregory F. Zoeller, Attorney
General of Indiana,
Appellee-Plaintiff

Crone, Judge.

Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015                  Page 1 of 12
                                              Case Summary
[1]   Hector Cavazos, Clifton Johnson, Gary McCracken, and Aldolfo Velez (“the

      Appellants”) appeal the trial court’s entry of partial summary judgment in favor

      of the State of Indiana on the State’s claim to recover public funds. At all

      relevant times, the Appellants were members of the East Chicago Public

      Library Board (“the Library Board”).1 The State filed a complaint to recover

      funds alleging that, in exchange for their service on the Library Board, the

      Appellants received the payment of health, dental, vision, and life insurance

      premiums on their behalf, in violation of Indiana Code Section 36-12-2-21,

      which states that “[a] member of a library board shall serve without

      compensation.” After the State filed a motion for partial summary judgment

      and the Appellants filed a cross-motion for summary judgment, the trial court

      granted the State’s motion. In entering partial summary judgment in the

      State’s favor, the trial court concluded as a matter of law that the term

      “compensation” includes the payment of insurance premiums, and therefore

      the Appellants’ receipt of such compensation in exchange for their service was

      in violation of statutory law and constituted the misappropriation of public

      funds. Accordingly, the trial court entered money judgments against each of

      the Appellants for the reimbursement of those funds. The sole issue presented

      for our review is whether the trial court erred in granting the State’s motion for

      1
       We note that several other Library Board members named as defendants below, including Manuel
      Montalvo, whose name appears in the case caption, are no longer parties to this lawsuit.

      Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015                   Page 2 of 12
      partial summary judgment. Concluding that the State is entitled to judgment as

      a matter of law, we affirm the trial court’s entry of partial summary judgment in

      favor of the State.

                                  Facts and Procedural History
[2]   The relevant material facts are undisputed. The State Board of Accounts (“the

      SBOA”) conducted an audit and supplemental audit of the East Chicago Public

      Library for the period of January 1, 2008 to December 31, 2010.2 During the

      audit period, the Appellants were members of the Library Board and each

      received the payment of insurance premiums for health, dental, vision, and life

      insurance in exchange for their service on the Library Board. The SBOA

      referred the audit reports to the Office of the Attorney General of Indiana. On

      April 18, 2011, the State filed a “Complaint to Recover Public Funds” alleging

      that the Appellants had misappropriated public funds. Specifically, the State

      asserted that the Appellants received the payment of health, dental, vision, and

      life insurance premiums in exchange for their service on the Library Board in

      violation of Indiana Code Section 36-12-2-21, which states in pertinent part that

      “[a] member of a library board shall serve without compensation.” The

      Appellants filed a motion to dismiss, which was denied by the trial court.

      2
        Although the record indicates that the SBOA conducted prior audits of the East Chicago Public Library,
      those audits are not relevant for the resolution of the particular issues addressed herein.

      Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015                        Page 3 of 12
[3]   Thereafter, the State filed its motion for partial summary judgment asserting, as

      a matter of law, that insurance premiums are compensation, and therefore the

      Appellants misappropriated public funds in receiving such compensation in

      exchange for their service on the Library Board in violation of Indiana Code

      Section 36-12-2-21. The Appellants filed a cross-motion for summary judgment

      arguing, as a matter of law, that insurance premiums are not compensation and

      that the Appellants were not prohibited from having their insurance premiums

      paid in exchange for their service on the Library Board.

[4]   Following a hearing on both motions, the trial court granted the State’s motion

      for partial summary judgment. In its order, the trial court found and

      concluded,

              1.     Indiana Code § 36-12-2-21 states that “[a] member of a library
              board shall serve without compensation.”
              2.    Compensation, in its plain and ordinary usage, includes
              premiums for health, dental, vision, and life insurance.
              3.      The [Library Board] approved the payment of health, dental,
              vision, and life insurance premiums for its members in exchange for
              their service on the [Library Board]. The following board members
              received premiums (or premiums were paid on their behalf) in the
              amounts listed below from January 1, 2008 to December 31, 2010:
                       Board Member                       Total Insurance Premiums
                       Clifton Johnson                    $52,636.26
                       Gary McCracken                     $24,604.76
                       Hector Cavazos                     $27,965.53
                       Aldolfo Velez                      $31,673.49
              4.      The payment and/or receipt of premiums for health, dental,
              vision, and life insurance constitutes compensation to the members of

      Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015         Page 4 of 12
              the [Library Board]. The receipt of compensation in exchange for
              service on the [Library Board] violates Ind. Code § 36-12-2-21.
              5.      Because the payment of premiums for health, dental, vision,
              and life insurance was made with public funds, and because the
              payment and/or receipt of those premiums violated Indiana law, [the
              Appellants] misappropriated the public funds of the East Chicago
              Public Library.
              6.    Thus, summary judgment should be entered for the State of
              Indiana and against [the Appellants].

      Appellants’ App. at 24-26. Accordingly, the trial court entered partial summary

      judgment in favor of the State and awarded the State money judgments against

      each of the Appellants in the amount of the total insurance premiums received

      by each, plus costs and interest from the date of the judgment until paid in full.

      This appeal ensued.

                                      Discussion and Decision
[5]   The Appellants challenge the trial court’s grant of the State’s motion for partial

      summary judgment. Our supreme court recently reiterated,

              The standard of review for a partial summary judgment is the same as
              that used in the trial court: summary judgment is appropriate only
              where the evidence shows that there is no genuine issue of material
              fact and that the moving party is entitled to judgment as a matter of
              law. Where the challenge to the trial court’s ruling presents only legal
              issues, not factual ones, the issues are reviewed de novo.

      Ballard v. Lewis, 8 N.E.3d 190, 193 (Ind. 2014) (citations omitted). Where the

      trial court enters specific findings of fact and conclusions thereon in support of

      its decision, although they aid our review of the summary judgment ruling, they

      Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015        Page 5 of 12
      are not binding upon us. Evansville Courier & Press v. Vanderburgh Cnty. Health

      Dep’t, 17 N.E.3d 922, 927 (Ind. 2014). “Pure questions of law, like the issues of

      statutory construction we address here, are particularly appropriate for

      summary resolution, and we review them de novo.” Id. (citations omitted).

[6]   The crux of the parties’ dispute is the meaning of the term “compensation” as

      used in Indiana Code Section 36-12-2-21. That section, entitled

      “Compensation of library board members,” states, “A member of a library

      board shall serve without compensation. A board member may not serve as a

      paid employee of the public library, except the treasurer as provided in section

      22 of this chapter.” Ind. Code § 36-12-2-21. The State asserts that insurance

      premiums are compensation, and therefore the Appellants’ receipt of those

      premiums in exchange for their service was in violation of Indiana law and

      constituted the misappropriation of public funds. The Appellants assert that

      insurance premiums are not compensation, and therefore they were not

      statutorily prohibited from receiving them.

[7]   When interpreting statutes, our primary purpose is to give effect to the intent of

      the legislature. F.D. v. Ind. Dep’t of Child Servs., 1 N.E.3d 131, 136 (Ind. 2013).

      “The first step in interpreting a statute is to determine whether the legislature

      has spoken clearly and unambiguously on the point in question.” Sees v. Bank

      One, Ind., N.A., 839 N.E.2d 154, 157 (Ind. 2005). If the statute is clear and

      unambiguous, we need not apply any rules of statutory construction other than

      to require that words and phrases be taken in their plain, ordinary, and usual

      sense. Id. If the legislature has not defined a word, we may properly consult

      Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015    Page 6 of 12
      English dictionaries to determine the plain and ordinary meaning of words.

      Naugle v. Beech Grove City Schs., 864 N.E.2d 1058, 1068 (Ind. 2007). We review

      the statute as a whole and will presume that the legislature intended for the

      statutory language used to be applied in a logical and not an absurd manner. In

      re Resnover, 979 N.E.2d 668, 674 (Ind. Ct. App. 2012). Clear and unambiguous

      statutes leave no room for judicial construction. Terkosky v. Ind. Dep’t of Educ.,

      996 N.E.2d 832, 842 (Ind. Ct. App. 2013).

[8]   We find the statutory language at issue here to be unambiguous. The

      legislature has proclaimed that a public library board member shall render his or

      her service “without compensation.” Ind. Code § 36-12-2-21. Because the

      legislature did not define the broad term “compensation” used in Article 12

      regarding libraries, we look to its plain and ordinary meaning.

      “Compensation” is defined as “[r]emuneration and other benefits received in

      return for services rendered.” BLACK’S LAW DICTIONARY (10th ed. 2014)

      (emphasis added). Ordinarily, this includes “wages, stock option plans, profit-

      sharing, commissions, bonuses, golden parachutes, vacation, sick pay, medical

      benefits, disability, leaves of absence, and expense reimbursement.” Id. (citing

      Kurt H. Decker & H. Thomas Felix II, Drafting and Revising Employment

      Contracts, § 3.17 at 68 (1991)). Thus, pursuant to a plain reading of the statutory

      language, the payment of premiums for health, dental, vision, and life insurance

      constitutes compensation, and the Appellants’ receipt of such compensation in

      Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015   Page 7 of 12
      exchange for their service on the Library Board violated Indiana Code Section

      36-12-2-21.3

[9]   We disagree with the Appellants’ assertion that the requirement that public

      library board members serve “without compensation” means only that, with the

      exception of the treasurer, they may not be paid employees of the library and

      receive a salary, but that insurance premiums and other fringe benefits are not

      strictly prohibited. Appellant’s Br. at 24. The Appellants argue that the second

      sentence of Section 21, which provides that a library board member “may not

      serve as a paid employee of the public library,” was intended to substantially

      narrow the meaning of the term “compensation” in the preceding sentence to

      the receipt of salary alone. This reading of the statutory language belies

      common sense and ignores the legislature’s use of separate and distinct

      sentences intended to convey wholly unique directives. The plain meaning of

      the statutory section read in its entirety is twofold: (1) a library board member

      may not receive compensation in exchange for service, and (2) paid employees

      of the library cannot serve on the board, with the exception of the treasurer.

      Contrary to the Appellants’ assertion, there is no language in this statutory

      section limiting the term compensation to anything other than its plain,

      3
        This definition of compensation is consistent with other articles of Title 36. See Ind. Code § 36-5-3-6
      (regarding elected town officers, “‘compensation’ means the total of all money paid to an elected town officer
      for performing duties as a town officer” and includes “all employee benefits paid to a town officer, including
      life insurance, health insurance, disability insurance, retirement benefits, and pension benefits.”)

      Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015                           Page 8 of 12
       ordinary, and usual meaning, which includes the payment of insurance

       premiums.4

[10]   We further disagree with the Appellants’ argument that another section of

       Article 12, Chapter 2 that uses the term “compensation” contains language that

       our legislature expressly intended to limit the term to salary alone. Specifically,

       the Appellants direct us to Indiana Code Section 36-12-2-22(b), regarding the

       treasurer of the library, which provides that the library board “may fix the rate

       of compensation for the services of the treasurer.” The Appellants insist that

       the use of the word “rate” in conjunction with “compensation” implies that

       “compensation” refers only to an amount paid at a certain hourly rate, such as

       a salary, and not to other fringe benefits. Appellants’ Br. at 24. We

       acknowledge that the word “rate” would not typically be used when discussing

       the payment of insurance premiums. However, we see no reason why that

       word could not and should not be used as it was here to refer to the payment of

       compensation to the library treasurer, as such compensation could include both

       salary and insurance premiums that the treasurer has been clearly authorized to

       receive if he or she happens to also be a paid employee of the library. See Ind.

       4
         We reject the Appellants’ reliance on the Home Rule Act as authority for the Library Board’s payment of
       insurance premiums to its members. The Home Rule Act grants a local governmental unit all powers
       granted by statute and “all other powers necessary or desirable in the conduct of its affairs, even though not
       granted by statute.” Ind. Code § 36-1-3-4(b). However, a governmental unit may only exercise any power it
       has to the extent that the power is not expressly denied by the Indiana Constitution or by statute. Ind. Code
       § 36-1-3-5(a). As we have stated, pursuant to Indiana Code Section 36-12-2-21, the legislature has expressly
       denied the Library Board the power to provide compensation, which includes insurance premiums, to its
       members in exchange for their service. Thus, the Home Rule Act is inapplicable.

       Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015                           Page 9 of 12
       Code § 36-12-2-21 (providing that paid employees of library may not serve on

       library board, with exception of treasurer); see also Ind. Code § 36-12-2-22

       (providing that library board shall elect library treasurer who may be either

       member of library board or employee of library).

[11]   Although not cited by the Appellants, we note that another section of Article12,

       Chapter 2, provides additional support for our conclusion that the legislature

       did not intend to restrict the plain and ordinary definition of compensation to

       salary alone. Regarding the employment of library personnel, our legislature

       has provided in relevant part that the Library Board shall “fix and pay the

       compensation” and “classify and adopt schedules of salaries” of the librarians

       and other individuals. Ind. Code § 36-12-2-24(b). This section suggests that

       compensation and salary are not meant to be interchangeable terms as the

       Appellants suggest.

[12]   Having determined as a matter of law that the Appellants received

       compensation in exchange for their service on the Library Board in violation of

       Indiana Code Section 36-12-2-21, we turn to the Appellants’ claim that a

       genuine issue of fact remains for trial regarding their knowledge as to the

       “wrongfulness” of their conduct. Appellants’ Reply Br. at 2. Specifically, the

       Appellants argue that Library Board members had been receiving insurance

       premiums for many years and that, although the SBOA clearly discovered this

       practice in prior audits, the SBOA never before submitted a report to the

       attorney general for prosecution. Thus, the Appellants claim that they were

       misled by the SBOA’s prior inaction and that they were without knowledge that

       Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015   Page 10 of 12
       they were prohibited from receiving the payment of insurance premiums in

       exchange for their service on the Library Board.

[13]   However, the Appellants’ knowledge as to the wrongfulness of their conduct is

       irrelevant for purposes of this appeal. Indiana Code Section 5-11-6-3 gives the

       attorney general authority to institute and prosecute civil proceedings if an

       examination or investigation reveals “that any public money” has been

       “unlawfully expended, either by having been expended for a purpose not

       authorized by law in an amount exceeding that authorized by law, or by having

       been paid to a person not lawfully entitled to receive it[.]” Moreover, Indiana

       Code Section 5-11-5-1 provides that once a signed and verified report of

       examination by the SBOA revealing an entity’s failure to comply with a specific

       law has been placed by the state examiner with the attorney general, the

       attorney general “shall diligently institute and prosecute civil proceedings”

       against any “proper person that will secure to the state or to the proper

       municipality the recovery of any funds misappropriated, diverted or

       unaccounted for.”

[14]   In other words, if public funds have been misappropriated or diverted, the State

       may seek and secure the recovery of those funds. This authority is irrespective

       of whether the person who wrongfully received public money knew that he or

       Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015   Page 11 of 12
       she was not lawfully entitled to receive it.5 We recognize that such unfettered

       discretion by our attorney general in prosecuting civil proceedings to recover

       funds may lead to seemingly harsh results, as it did here. However, it is not

       within the province of the trial court or this Court to second-guess such

       decisions. Because the undisputed material facts establish that public money

       was unlawfully expended for the insurance premiums of the Appellants, the

       trial court properly entered partial summary judgment in favor of the State and

       money judgments against each of the Appellants for the recovery of those

       funds. The trial court’s judgment is affirmed.

[15]   Affirmed.

       Friedlander, J., and Kirsch, J., concur.

       5
         We note that although not relevant for purposes of this appeal, the Appellants’ knowledge or lack thereof as
       to the wrongfulness of their conduct is relevant regarding the State’s claim for treble damages. See Ind. Code
       § 5-11-5-4 (the State shall be entitled to recover, in addition to the amount misappropriated, all such penalties
       and interest as might be recoverable under laws other than this chapter); Ind. Code § 35-43-4-3 (a person who
       knowingly or intentionally exerts unauthorized control over the property of another person commits
       conversion); Ind. Code § 34-24-3-1 (a person who suffers a pecuniary loss as a result of a violation of IC 35-43
       may bring a civil action against the person who caused the loss for treble damages). Because the State’s claim
       for treble damages is not a subject of the current appeal from the trial court’s entry of partial summary
       judgment, we do not address it.

       Court of Appeals of Indiana | Opinion 45A03-1312-PL-495 | March 9, 2015                            Page 12 of 12