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A school corporation’s contract with a company for access to a wind turbine represented an unauthorized investment under Indiana law and was void and unenforceable, the Indiana Supreme Court ruled Thursday in affirming a trial court’s granting of summary judgment to Randolph Eastern School Corporation.
In 2008, Performance Services Inc. approached the school corporation about constructing a wind turbine
After getting approval from the RESC school board, the two parties entered into a contract for the project.
According to court records, Performance agreed to construct and operate the turbine, as well as sell the generated power and renewable energy credits on the open market.
The company also agreed to provide RESC with access to the turbine for educational purposes.
RESC agreed to pay Performance $77,000 biannually and the school corporation would receive a credit against each payment based on the percentage of the turbine’s net revenue.
If the net revenue exceeded the payment, then Performance agreed to play the first $10,000 in an “operating reserve account” and then remit to RESC any excess amounts.
The then-superintendent of the school corporation expected to receive a surplus each year if things went as predicted.
Following the execution of the contract and its amendments, the state’s Board of Accounts informed Performance that school corporations didn’t have the statutory authority to invest in a wind turbine project.
RESC never made any payments to Performance, even though it received invoices in 2016 and 2021.
The school corporation brought a declaratory judgment action seeking to void the contract, alleging that it constituted an illegal investment.
Performance responded that the contract was “legally valid and binding” and filed counterclaims.
RESC then moved for summary judgment on all of the claims and counterclaims and Performance moved for partial summary judgment on its counterclaims for breach of contract and suit on account.
The Randolph Circuit Court granted RESC’s motion for summary judgment and denied Performance’s cross-motion for summary judgment.
Performance appealed to the Court of Appeals of Indiana, where a split panel reversed the trial court’s ruling.
The COA found that the contract was not for an investment, because it was the school corporation making payments for services from Performance.
However, Judge Elaine Brown dissented, noting the contract reflected an illegal investment that the school corporation sought a financial return on.
RESC petitioned for a transfer which the Supreme Court granted, vacating the appellate court’s opinion.
The Supreme Court affirmed the trial court’s granting of summary judgment to RESC.
The first issue the high court looked at was whether under Indiana’s Home Rule and Public Investment Acts, “invest” means to commit money in hopes of obtaining a financial return.
Chief Justice Loretta Rush wrote that both of the parties acknowledged that neither the Home Rule Act nor the Public Investment Act define the term “invest” so they both supplied their own definitions.
The court found “invest” as used in the acts to mean committing money in hopes of obtaining a financial return.
Looking at the how that applied to the contract, the court found that because RESC contracted to invest in the turbine, the contract is void and unenforceable.
“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,” Rush wrote.
The high court held that the contract constituted an unauthorized investment under Indiana law and is void and unenforceable.
The case is Performance Services Inc. v. Randolph Eastern School Corporation, 22A-CP-361.
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