Split COA reverses against school corporation in unpaid wind turbine usage dispute

A divided Court of Appeals of Indiana has reversed for a construction company that sued an Indiana school corporation after it failed to pay $1.5 million in damages for its access to a wind turbine.

In 2009, the Randolph Eastern School Corporation entered into a contract with Performance Services Inc. for the construction and operation of a wind turbine in Union City.

Under the parties’ contract, the school corporation was given physical access to the wind turbine as well as access to data generated by the turbine for educational purposes for its students. The school corporation also had the option to purchase the turbine after five years of payments.

In exchange for access to the turbine, the school corporation agreed to pay $154,000 per year to Performance. However, they didn’t pay and Performance sued in 2021 seeking $1.5 million in damages on the unpaid fees.

The school corporation responded, not with a check, but with a lawsuit, filing for declaratory judgment and seeking to have the contract declared void.

Among its proposed legal reasons to void the contract were theories that the contract reflected an illegal investment by a political subdivision, was an illegal lease, and that it violated Indiana’s Public Works Act, among other arguments.

Performance countered with its own suit against the school corporation for breach of contract, suit on account, and equitable entitlement to the reasonable value of services provided.

The Randolph Circuit Court ultimately entered summary judgment to the school corporation, concluding that the contract reflected an illegal investment by a political subdivision under state law.

But in a split reversal, an appellate panel majority concluded that the parties’ contract does not reflect an investment by the school corporation. Rather, it found the school corporation agreed to make semiannual payments to Performance of $77,000 each in exchange for certain access to the wind turbine and its data, but simply never paid or sought to exercise its purchasing options.

“Thus, on this undisputed, designated evidence, the relationship between the School Corporation and Performance never amounted to more than the School Corporation owing payments for services rendered by Performance,” Judge Paul Mathias wrote, joined by Judge Terry Crone.

The majority noted that the plain definition of “invest” applies the hoped-for financial return to the same person or entity that provides the initial commitment of money, not to the recipient of that money.

“Therefore, the Contract here does not reflect an illegal investment by a political subdivision, and the trial court erred when it entered summary judgment for the School Corporation on this issue,” Mathias wrote.

Neither was the contract an illegal lease, the majority found. They concluded that the parties’ relationship did not create a property right of the school corporation in the wind turbine, but rather a contract right that Performance could have revoked based on the school corporation’s nonperformance.

In finding that the contract was not a lease, the majority concluded that the Public Leasing Act was also not applicable to the parties’ contract. Neither did the contract violate Indiana Public Works Act. Finally, it noted that the purported indefiniteness of the number of semiannual payments due from the school corporation in the original contract is not a basis for declaring the contract void.

“We reverse the trial court’s judgment and remand with instructions to deny the School Corporation’s motion for summary judgment, to grant Performance’s motion for summary judgment, and to hold a hearing on Performance’s damages in accordance with this opinion,” the majority concluded.

Judge Elaine Brown dissented from the majority, parting ways with the majority’s conclusion that the contract does not reflect an investment by the school corporation.

“The Contract between the School Corporation and Performance reflects an illegal investment by a school corporation in which the School Corporation sought a financial return,” Brown opined. “Based upon the record, and for the reasons stated in the trial court’s order, I would affirm the trial court’s grant of summary judgment to the School Corporation.”

The case is Performance Services, Inc. v. Randolph Eastern School Corporation, 22A-CP-361.