City of New Albany v. Board of Commissioners of the County of Floyd, New Albany Floyd County Indiana Building Authority

FILED May 22 2019, 9:01 am

CLERK Indiana Supreme Court Court of Appeals and Tax Court

ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE Anne K. Ricchiuto BOARD OF COMMISSIONERS OF Jane Dall Wilson THE COUNTY OF FLOYD Stephanie L. Boxell Richard Fox Faegre Baker Daniels LLP Kristi L. Fox Indianapolis, Indiana Fox Law Offices New Albany, Indiana

Bart A. Karwath Mark J. Crandley Barnes & Thornburg LLP Indianapolis, Indiana

IN THE COURT OF APPEALS OF INDIANA

City of New Albany, May 22, 2019 Appellant-Intervenor/Counterclaimant, Court of Appeals Case No. 18A-MI-1627 v. Appeal from the Floyd Superior Court Board of Commissioners of the The Honorable Vicki Carmichael, County of Floyd, Special Judge Appellee-Plaintiff/Counterclaim Trial Court Cause No. Defendant, 22D02-1804-MI-598

New Albany Floyd County Indiana Building Authority, Appellee-Defendant/Cross-Claim Defendant.

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Bradford, Judge.

Case Summary [1] Between 1991 and 1992 the New Albany Floyd County Indiana Building

Authority (“the Building Authority”) issued bonds in order to finance a

Criminal Justice Center (“the Center”). In 1992, Floyd County (“the County”),

through its Board of Commissioners, entered into a fifteen-year lease (“the 1992

Lease”) with the Building Authority, in which the County would lease the

Center and the City of New Albany (“the City”) would sublease from the

County. In 2018, approximately ten years after the 1992 Lease ended, the

County demanded that the Building Authority deed over the title of the Center

pursuant to a provision in the 1992 Lease. After the Building Authority refused,

the County filed suit seeking declaratory judgment and specific performance.

The City intervened in the suit. Following a bench trial, the trial court entered

judgment in favor of the County. The City contends that pursuant to Indiana

Code chapter 36-9-13, the Building Authority lacked the authority to agree to

such a provision that voluntarily divested itself of the Center’s title. Because we

agree that the Building Authority lacked the statutory authority to agree to such

a provision but also conclude that the County can still exercise a purchase

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option in the 1992 Lease, we reverse and remand to the trial court for further

proceedings consistent with this opinion.1

Facts and Procedural History [2] In the 1950s, the City and the County formed the Building Authority to issue

bonds in order to finance a City-County Building. Between 1991 and 1992, the

City and County agreed that the Building Authority would again issue bonds in

order to finance the construction of the Center, which would be joined to the

City-County Building. An inter-local agreement provided that the Building

Authority would own the Center and the County would lease it pursuant to the

terms of the 1992 Lease entered into by the County and the Building Authority.

The inter-local agreement also stated that the City would sublease space in the

Center from the County. The County would finance the 1992 Lease payments

using Economic Development Income Tax (“EDIT”) revenues allocated from

both the County’s and the City’s share of said revenues. [3] On September 3, 1992, the County and the Building Authority executed the

1992 Lease. The 1992 Lease was for a term of fifteen years, beginning in

September of 1993 when the Center was ready for partial occupancy by the City

1 We held oral argument in this case on April 24, 2019, at the Indiana State House in Indianapolis. We wish to commend counsel for the high quality of their arguments.

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police and County sheriff’s departments. The 1992 Lease terms included a turn-

over provision (“the Turn-Over Provision”) which provided that

[i]n the event [the County] has not exercised its option to purchase the [Center] in accordance with Section 9 hereof and has not exercised its option to renew this Lease in accordance with Section 10 hereof, then, upon expiration of this Lease and upon full performance by [the County] of its obligations under this Lease, the [Center] shall become the absolute property of [the County], and, upon [the County’s] request, [the Building Authority] shall execute proper instruments conveying to [the County] all of [the Building Authority’s] title thereto.

Appellant’s App. Vol. III p. 16–17. The 1992 Lease also included a statutory

application provision (“the Statutory Application Provision”) which provided

that

[the Building Authority] was organized for the purpose of constructing and erecting the City County Building and leasing the same to [the County] under the provisions of the Indiana Code 36-9-13. All provisions herein contained shall be construed in accordance with the provisions of said Chapter, and to the extent of inconsistencies, if any, between the covenants and agreements in this Lease and provisions of said Chapter, the provisions of said Chapter shall be deemed to be controlling and binding upon [the Building Authority] and [the County].

Id. at 18. [4] After the 1992 Lease expired in September of 2008, the City and the County

continued occupying the Center, splitting the operational costs according to the

amount of space each occupied. In 2015, the County began negotiating a multi-

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million-dollar renovation of the Center with the Building Authority. By 2018,

the County requested that the Building Authority transfer title of the Center to

the County pursuant to the Turn-Over Provision. [5] After the Building Authority declined to transfer title, the County filed suit on

April 27, 2018, seeking, inter alia, declaratory judgment and specific

performance.2 The County also moved to expedite the proceedings, which

motion was granted. On May 18, 2018, the trial court granted the City’s motion

to intervene. On June 15, 2018, a bench trial was held to resolve all claims,

counterclaims, and defenses regarding the County’s request for declaratory

judgment and specific performance. On June 19, 2018, the trial court entered

declaratory judgment in favor of the County, concluding that the Turn-Over

Provision in the 1992 Lease was valid pursuant to Indiana Code section 36-9-

13-22(a)(6), making the Center the property of the County. The trial court also

ordered that title of the Center be divested from the Building Authority and

vested in the County pursuant to Indiana Trial Rule 70.

Discussion and Decision [6] The City contends that the trial court erroneously entered declaratory judgment

in favor of the County and ordered title of the Center be divested from the

Building Authority and vested in the County pursuant to Indiana Trial Rule 70.

2 The County also sought attorneys’ fees, costs, and damages which were bifurcated from this current matter and not included in the trial court’s Indiana Trial Rule 54(B) final judgment.

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“[D]eclaratory orders, judgments and decrees have the force and effect of final

judgments and are reviewed as any other order, judgment and decree.” Ind.

Farmers Mut. Ins. Co. v. Ellison, 679 N.E.2d 1378, 1380 (Ind. Ct. App. 1997),

trans. denied. When a trial court, as it did here, enters judgment without making

specific findings of fact, we may affirm that general judgment on any theory

supported by the evidence admitted at trial. DeKalb Chiropractic Center, Inc. v.

Bio-Testing Innovation, Inc., 678 N.E.2d 412, 414 (Ind. Ct. App. 1997). We will

not reweigh evidence or judge the credibility of witnesses. Id. “We consider the

evidence most favorable to the appellee and will reverse only if the evidence

entitles the appellant to a finding in his favor as a matter of law.” Id. “We

review matters of statutory interpretation de novo because they present pure

questions of law.” Nicoson v. State, 938 N.E.2d 660, 663 (Ind. 2010).

I. Turn-Over Provision A. Indiana Code Chapter 36-9-13 [7] The City contends that the trial court erroneously interpreted Indiana Code

section 36-9-13-22(a)(6) to permit the Building Authority to agree to the Turn-

Over Provision. Our goal in construing a statute is to determine and give effect

to legislative intent. AlliedSignal, Inc. v. Ott, 785 N.E.2d 1068, 1078 (Ind. 2003).

“To give effect to the legislature’s intent, we do not consider a statutory

provision in isolation but rather consider the statute as a whole and interpret an

individual provision so as to harmonize it with other sections of the

enactment.” Id. “Where statutory provisions are in conflict, no part of a statute

should be rendered meaningless but should be reconciled with the rest of the Court of Appeals of Indiana | Opinion 18A-MI-1627 | May 22, 2019 Page 6 of 14

statute.” Id. at 1079 (quoting Robinson v. Wroblewski, 704 N.E.2d 467, 474 (Ind.

1998)). “We generally presume that all statutory language is used intentionally,

so that, [e]ach word should be given effect and meaning where possible and not

treated as mere surplusage.” In re Howell, 27 N.E.3d 723, 726 (Ind. 2015)

(internal quotations and citations omitted). Indiana Code section 36-9-13-

22(a)(6) dictates that “the board of directors of a building authority, acting in

the name of the authority, may acquire real or personal property by gift, devise,

or bequest and hold, use, or dispose of that property for the purposes authorized

by this chapter[.]” (emphasis added). [8] We conclude that Indiana Code chapter 36-9-13, specifically Indiana Code

section 36-9-13-22(a)(6), does not permit the Building Authority to agree to the

Turn-Over Provision in the 1992 Lease. We interpret Indiana Code section 36-

9-13-22(a)(6) to permit building authorities to hold, use, or dispose only of real

or personal property that it acquired by gift, devise, or bequest. We emphasize

that the General Assembly’s use of the word “that” in the statute refers to

property acquired by gift, devise, or bequest. [9] The County argues that the General Assembly’s use of “that” should be

interpreted to refer to any real or personal property that is acquired by a

building authority regardless of how it was acquired. This argument fails for

multiple reasons. First, the County’s interpretation would make the use of the

words “gift, devise, or bequest” mere surplusage, which we presume was not

the General Assembly’s intent. See In re Howell, 27 N.E.3d at 726. Moreover, if

Indiana Code section 36-9-13-22(a)(6) permitted building authorities to dispose

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of any real or personal property regardless of the way in which it was acquired,

as the County suggests, it would render the other dispositional powers granted

to building authorities in Indiana Code chapter 36-9-13 irrelevant. See Ind.

Code § 36-9-13-25 (disposition through options to purchase); see also Ind. Code §

36-9-13-41 (disposition through dissolution). Therefore, because it is undisputed

that the Center was not acquired by gift, devise, or bequest, the Building

Authority lacked the statutory authority to agree to the Turn-Over Provision.

B. Indiana Code Chapter 36-1-11 [10] The County also argues that even if the Building Authority did not have the

authority to agree to the Turn-Over Provision pursuant to Indiana Code chapter

36-9-13, it did pursuant to Indiana Code chapter 36-1-11, which governs a

governmental entity’s authority to dispose of real property.

There is a strong presumption that the legislature in enacting a particular piece of legislation is aware of existing statutes on the same subject…[W]here one statute deals with a subject in general terms and another statute deals with a part of the same subject in a more specific manner, then the two should be harmonized, if possible; but if they are in irreconcilable conflict then the more detailed will prevail as to the subject matter it covers.

Ind. Alcoholic Beverage Comm’n v. Osco Drug, Inc., 431 N.E.2d 823, 833 (Ind. Ct.

App. 1982). Because a building authority is also a governmental entity, the

County points to Indiana Code section 36-1-11-8 as authorization for the

Building Authority to agree to the Turn-Over Provision. Indiana Code section

36-1-11-8 dictates that

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[a] transfer or exchange of property may be made with a governmental entity upon terms and conditions agreed upon by the entities as evidenced by adoption of a substantially identical resolution by each entity. Such a transfer may be made for any amount of real property, cash, or other personal property, as agreed upon by the entities.

[11] We conclude that Indiana Code chapter 36-9-13 and Indiana Code chapter 36-

1-11 are in irreconcilable conflict in regards to the dispositional powers of

building authorities; thus, the more specific chapter, Indiana Code chapter 36-9-

13, must prevail. Indiana Code chapter 36-9-13 specifically details the authority

of building authorities whereas Indiana Code chapter 36-1-11 deals more

generally with governmental entities. If the general dispositional authority

outlined in Indiana Code chapter 36-1-11 is held to be controlling, it would

leave the dispositional powers outlined specifically for building authorities in

Indiana Code chapter 36-9-13 superfluous, which would be contrary to

precedent. See Althaus v. Evansville Courier Co., 615 N.E.2d 441, 444 (Ind. Ct.

App. 1993) (finding where two statutes dealing with the same subject matter are

irreconcilably conflicting, the more detailed statute prevails over the general

statute). Moreover, both the Building Authority and the County agreed to the

Statutory Application Provision in the 1992 Lease which mandated that

Indiana Code chapter 36-9-13 would govern the terms of said lease. We

construe the 1992 Lease as any other contract, which by its clear and

unambiguous terms binds the County to the Statutory Application Provision for

which it bargained. See Whiteco Indus., Inc. v. Nickolick, 571 N.E.2d 1337, 1339

(Ind. Ct. App. 1991) (“A lease is to be construed as any other contract…Where

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no defect is claimed to have occurred during formation of the contract, its

terms, if unambiguous, are conclusive on the question of the intentions of the

parties.”). In summary, we conclude that the County has failed to establish that

the Building Authority had any statutory authority to agree to the Turn-Over

Provision.

II. Purchase Option [12] That said, we choose not to ignore the fact that the County, as a holdover

tenant, may still acquire title to the Center by exercising its purchase option in

the 1992 Lease.

When a lessee under a lease for a definite term holds over after the expiration of that term, the lessor has the option of treating the lessee as a tenant or a trespasser. In the absence of an agreement to the contrary, when a tenant holds over beyond the expiration of the lease and continues to make rental payments, and the lessor does not treat the tenant as a trespasser by evicting him, the parties are deemed to have continued the tenancy under the terms of the expired lease. When the original lease was for more than one year, the renewal lease is for a year at a time.

Houston v. Booher, 647 N.E.2d 16, 19 (Ind. Ct. App. 1995) (internal citations

omitted). [13] The 1992 Lease expired in September of 2008, and thereafter the status quo was

maintained. Neither party claims that at any time since the expiration of the

1992 Lease has the Building Authority attempted to evict the County. Rather,

the County has continued to occupy its share of the Center and pay its share of

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the operational costs for approximately a decade. Because the County held over

beyond the expiration of the 1992 Lease, both the Building Authority and the

County have continued the tenancy under the terms of the 1992 Lease, which

includes the purchase option. The purchase option states that

[the Building Authority] hereby grants to [the County] the right and option, on any rental payment date prior to the expiration of this Lease, upon written notice to [the Building Authority], to purchase the [Center] at a price equal to the amount required to enable [the Building Authority] to liquidate by paying all indebtedness, including the Bonds, with accrued and unpaid interest to the first date on which such indebtedness may be redeemed and all premiums payable on the redemption thereof, and by paying the expenses and charges of liquidation and the cost of transferring the [Center].

Appellant’s App. Vol. III p. 37. Therefore, while we remand this matter to the

trial court so that it can vacate its order granting title to the Center in the

County, the County may still exercise its purchase option pursuant to the 1992

Lease.

Conclusion [14] Because Indiana Code chapter 36-9-13 controlled the terms of the 1992 Lease,

the Building Authority lacked the statutory authority to agree to the Turn-Over

Provision, making it void. We therefore remand with instructions to vacate the

order granting title to the Center in the County. Since the expiration of the 1992

Lease, the County has continued occupying the Center as a holdover tenant

which means both the Building Authority and the County are deemed to have

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continued the tenancy under the terms of said lease. Therefore, the County has

the option to purchase the Center pursuant to the purchase option in section

nine of the 1992 Lease. [15] The judgment of the trial court is reversed and remanded with instructions for

further proceedings consistent with this opinion.

Bailey, J., concurs.

Brown, J., concurs in part and dissents in part with opinion.

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IN THE COURT OF APPEALS OF INDIANA

City of New Albany, Court of Appeals Case No. 18A-MI-1627 Appellant-Intervenor/Counterclaimant,

v.

Board of Commissioners of the County of Floyd, Appellee-Plaintiff/Counterclaim Defendant,

New Albany Floyd County Indiana Building Authority, Appellee-Defendant/Cross-Claim Defendant.

Brown, Judge, concurring in part and dissenting in part. [16] I concur with the majority’s conclusion in Part II that the County may still

exercise its option to purchase the Center pursuant to the 1992 Lease.

However, I respectfully disagree with Part I of the opinion, do not find Ind.

Code §§ 36-9-13-22(a)(6) and 36-1-11-8 to be in irreconcilable conflict, and

would find that in this instance the County should be able to rely on the

authority granted in Ind. Code § 36-1-11-8. Further, Ind. Code § 36-1-11-8

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contemplates a transfer or exchange of property made specifically to “a

governmental entity,” a condition which is not present in Ind. Code § 36-9-13-

22(a)(6). [17] For these reasons I respectfully concur in part and dissent in part.

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