ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE:
BRADLEY C. MORRIS LAWRENCE STRODTMAN
MICHAEL D. RAMSEY DAVID M. SEITER
Johnson, Smith, Pence & Heath, LLP L. Strodtman & Associates
Indianapolis, Indiana Cumberland, Indiana
COURT OF APPEALS OF INDIANA
ECORP, INC., d/b/a EARTHCO, )
Appellant-Defendant, ) )
vs. ) No. 49A04-0004-CV-158
ROBERT ROOKSBY, )
The Honorable Thomas J. Carroll, Judge
Cause No. 49D06-9910-CP-1430
APPEAL FROM THE MARION SUPERIOR COURT
April 19, 2001
Appellant-defendant Ecorp, Inc., d/b/a Earthco (Earthco) appeals the trial courts grant of partial
summary judgment in favor of appellee-plaintiff Robert Rooksby. Specifically, Earthco contends that
a genuine issue of material fact exists regarding whether a corporate recapitalization program
The facts most favorable to Earthco indicate that Rooksby began working as an
independent consultant for Earthco in 1996. To take advantage of certain tax
credits, Earthco began developing facilities to create a solid synthetic fuel from coal
finds. Record at 317, 318. In general, Rooksbys work for Earthco
involved designing systems that would reclaim the finds and discovering multiple sites for
the facilities. R. at 317.
According to the first agreement between the parties, Rooksby was to provide consulting
services for a specific processing plant in Utah. On February 3, 1997,
Earthco and Rooksby entered into a second agreement, wherein Rooksby assumed responsibility for
identifying and introducing coal sites into the Earthco recovery program. In return
for each coal site Rooksby identified and introduced, Earthco agreed to pay him
$50,000. On March 10, 1997, Earthco and Rooksby entered into a third
agreement, wherein Earthco retained Rooksby to serve as Senior Coal Consultant. Pursuant
to the March 10, 1997 agreement, Earthco agreed to pay Rooksby a monthly
consulting fee of $7000.
During 1997, Rooksby and James Scott, President of Earthco, discussed making Rooksby an
Earthco employee rather than retain him as an independent contractor. Their negotiations
culminated in a January 6, 1999 contract for employment, which both men signed.
R. at 28-30. According to the contracts terms, Rooksbys employment would
be predated to July 1, 1998, and would expire on June 30, 2003.
The central dispute arises from the following portion of the employment agreement:
The monthly salary for this position shall be Fifteen Thousand Dollars commencing on
July 1, 1998 and shall be increased by five percent (5%) on each
annual anniversary thereafter. The present payments of Seven Thousand ($7,000.00) per month
will be continued until a corporate recapitalization program is completed. Immediately thereafter,
the accrued but unpaid portion of the base salary and the remaining site
bonus payments will be made to Rooksby.
R. at 28-29 (emphasis supplied). The undisputed facts demonstrate that the term
present payments refers to the $7000 monthly fee Rooksby was receiving pursuant to
the March 10, 1997 agreement. R. at 125. Additionally, the term
site bonus payments refers to the $135,000 in site bonuses, which Rooksby had
earned as Earthcos consultant but were not paid to him as of the
date of the contract. R. at 345-46.
DISCUSSION AND DECISION
On April 15, 1999, Rooksby presented a written demand for his unpaid salary
and unpaid site bonuses, totaling $221,500. The unpaid salary amounted to $86,500,
while unpaid site bonuses totaled $135,000. Rooksby calculated the salary owed him
as the full $15,000 monthly salary that had accrued over nine and one-half
months according to the January 6, 1999 employment agreement. From July 1,
1998, until February 28, 1999, Earthco had paid Rooksby $7000 per month.
Thus, he demanded the additional $8000 per month over eight months that had
accrued according to the employment agreement. And, because Earthco paid Rooksby no
monthly salary for March or April 1999, he demanded an additional $22,500.
R. at 150.
Following Earthcos refusal to pay, Rooksby filed a complaint against Earthco in July
1999, for the $86,500 in unpaid salary. Rooksby also sought to enforce
an employees lien he filed against Earthco in accordance with
Ind. Code §
See footnote Rooksby later filed two amended complaints. In his final amended
complaint, Rooksby demanded both the unpaid salary and unpaid site bonuses in Count
I of the complaint. In Counts II, III, and IV of the
final amended complaint, Rooksby claimed continuing breach of contract, conversion, and constructive fraud,
On October 18, 1999, Rooksby moved for partial summary judgment, contending that Earthco
was in continuing breach of the employment contract by failing to pay wages
and benefits as they came due. Therefore, he requested a total of
$404,250 for damages accrued through September 30, 1999. The day after Rooksby
filed his motion for partial summary judgment, Earthco sold four of its coal
facilities for a total of $11 million. Money from this sale was
placed in an escrow account to pay Earthco creditors. Earthco did not
receive any of the $11 million directly.
Determining that there was no just reason for delay, the trial court granted
partial summary judgment in favor of Rooksby in the amount of $221,500, representing
$86,500.00 in unpaid compensation through April 15, 1999 and $135,000 in unpaid site
bonuses. R. at 540. The trial court did not state upon
which count of Rooksbys complaint it was entering partial summary judgment. Earthco
now appeals the partial summary judgment.See footnote
I. Standard of Review
Our standard of review of a partial summary judgment is the same as
it was for the trial court: whether there is a genuine issue
of material fact and whether the moving party was entitled to judgment as
a matter of law. See Ind. Trial Rule 56(C). All evidence
must be construed in favor of the opposing party, and all doubts as
to the existence of a material fact must be resolved against the moving
party. Bailey v. Manors Group, 642 N.E.2d 249, 252 (Ind. Ct. App.
1994), trans. denied. When reviewing a motion for partial summary judgment, if
there are no factual disputes, the courts task is to apply the relevant
law to the undisputed facts. Speedway Intl Trucks, Inc. v. Rosselle, 648
N.E.2d 1161, 1162 (Ind. 1995).
II. Interpreting Rooksbys Employment Contract
Earthco contends that the trial court erred in granting partial summary judgment because
of the existence of a genuine issue of material fact. More specifically,
Earthco contends that the unpaid salary and site bonuses are only payable upon
the completion of a corporate recapitalization program in accordance with the parties agreement.
According to Earthco, a corporate recapitalization program has not been completed.
In contrast, Rooksby urges that sale of the four coal sites and subsequent
payment of creditors marked the completion of a corporate recapitalization program, making due
his unpaid salary and site bonuses.
A. The General Rules of Contract Interpretation
Addressing the parties contentions, we note that the primary purpose in contract construction
is to ascertain and give effect to the parties mutual intent. Hutchinson,
Shockey, Erley & Co. v. Evansville-Vanderburgh County Bldg. Auth., 644 N.E.2d 1228, 1231
(Ind. 1994). When a court is asked to interpret an agreement, it
is necessary for the court to examine the parties intent when they wrote
the agreement. Kelly v. Smith, 611 N.E.2d 118, 121 (Ind. 1993).
Absent ambiguity, the terms of a contract will be given their plain and
ordinary meaning. George Uzelac & Assocs., Inc. v. Guzik, 663 N.E.2d 238,
240 (Ind. Ct. App. 1996), trans. denied. The terms of a contract
are not considered ambiguous because the parties dispute the proper interpretation of the
B. Ambiguous Technical Terms
An ambiguity exists only where reasonable people could come to different conclusions about
the contracts meaning. Ruff v. Charter Behavioral Health Sys. of Northwest Indiana,
Inc., 699 N.E.2d 1171, 1176 (Ind. Ct. App. 1998), trans. denied. If
a contract is ambiguous solely because of the language used in the contract
and not because of extrinsic facts, then its construction is purely a question
of law for the courts. Fresh Cut, Inc. v. Fazli, 650 N.E.2d
1126, 1133 (Ind. 1995). However, where a contract is ambiguous and the
meaning may need to be determined by extrinsic evidence, then such a construction
is a matter for the factfinder. Id. Our sister states apply
this general rule when dealing with technical words or terms of art used
in contracts. See Les-Bil, Inc. v. Gen. Waterworks Corp., 511 S.W.2d 166,
169 (Ark. 1974) ([W]hen a technical term is used in a sense other
than the ordinary meaning of the word[,] testimony is admissible to explain the
meaning of the term and the question may be submitted to the trier
of fact to determine in what sense the term was used.); Timberline
Equip. Co. v. St. Paul Fire and Marine Ins. Co., 576 P.2d 1244,
1246 (Or. 1978) ([I]f language of the contract is ambiguous, or if technical
words, local phrases or terms of art are used and evidence is properly
admitted showing meaning, the question becomes one of fact.); Brown v. Poston, 269
P.2d 967, 969 (Wash. 1954) (The subject matter of the contract was technical
in nature, and many of the terms and drawings included in the plans
and specifications could not be interpreted intelligently without reference to testimony to explain
them.); see also 17A Am. Jur. 2d Contracts § 363, at 385-86 (1991)
(collecting cases under heading Technical words).
In examining Rooksbys employment contract, no clear meaning of recapitalization emerges from the
documents four corners. The parties have not cited any Indiana case law
or statute defining recapitalization, nor has our research uncovered any. The term
has appeared in at least two U.S. Supreme Court decisions applying the antecedent
to 26 U.S.C. § 368, which lists certain corporate transactions exempt from taxation.
In Helvering v. Southwest Consolidated Corp., the Court defined recapitalization as a
reshuffling of a capital structure within the framework of an existing corporation.
315 U.S. 194, 202 (1942). The Court has also defined recapitalization as
a new form of the previous participation in the enterprise, involving no change
of substance of rights and relations of the interested parties one to another
or to the corporate assets. Bazley v. Commissioner of Internal Revenue, 331
U.S. 737, 740 (1947). However, the Bazley court carefully avoided fashioning an
abstract definition of recapitalization. Instead, it defined the term within the context
of the Internal Revenue Code provision at hand. Id. at 741.
Likewise, state courts dealing with the term recapitalization in contracts are careful to
define the term in the context of the parties intent. In a
Delaware decision, the supreme court addressed a stock certificate provision granting preferred shareholders
a beneficial adjustment in their stock after recapitalization. Wood v. Coastal States
Gas Corp., 401 A.2d 932, 939 (Del. 1979). The Coastal court acknowledged
that the circumstances of that case may have fit under the general definition
of recapitalization, which is, a fundamental realignment of relationships amongst a companys securities
or a reshuffling of the capital structure. Id. (citing Helvering, 315 U.S.
194). However, the stock certificate provision contemplated more specific circumstances as a
recapitalization that would trigger the beneficial adjustment. Id. (noting that the general
definition of recapitalization was not the test, rather [t]he critical question concerns what
[wa]s said in the contract); see also Shoffner v. Woodward, 394 S.E.2d 921,
924 (Ga. Ct. App. 1990) ([W]e will not attempt an abstract definition of
recapitalization, but will ascertain the meaning of the term in the context in
which it is used and in accordance with the parties intention.).
III. Specific Application in Light of Partial Summary Judgment
Turning to the facts of the instant case, Earthco maintains that a recapitalization
involves an arrangement whereby stock, bonds, or other securities of a corporation are
adjusted as to type, amount, income or priority, or as a realignment of
the capital structure in the framework of an existing corporation. Appellants brief
at 12 (citing Blacks Law Dictionary (5th ed. 1983)). According to
Scott, Earthcos president, the sale of the four facilities was an asset sale
that did not involve any new injection of capital or new shareholders, did
not involve any adjustment as to the type, amount, income, or priority of
Earthcos stock, and did not involve any realignment of the capital structure within
Earthco. Appellants brief at 14.
Earthco has presented a genuine issue of material fact, that is, the parties
intent in agreeing to pay Rooksbys accrued salary and site bonuses after a
recapitalization program had been completed. Given the technical nature of the term
used, reasonable people could arrive at different conclusions about the meaning of recapitalization
in Rooksbys employment contract. In other words, an ambiguity exists in the
employment contract that can only be resolved in light of extrinsic evidence.
As such, the trial court should have employed [r]ules of contract construction and
extrinsic evidence . . . to determine and give effect to the parties
reasonable expectations. See Fresh Cut, 650 N.E.2d at 1133. Therefore, under
these circumstances, resolution of the issue was inappropriate for summary judgment. See
Judgment reversed and remanded for further proceedings consistent with this opinion.
SHARPNACK, C.J., and SULLIVAN, J., concur.
Rooksby tendered the demand letter on April 15, 1999.
Presumably, he demanded one and one-half months salary for March and the first
fifteen days in April.
Footnote: The Employee Lien statute provides, in part:
(a) Except as provided in subsection (b), the employees of any corporation doing
business in Indiana, whether organized under the laws of this state or otherwise,
are entitled to have and hold a first and prior lien upon:
(1) the corporate property of the corporation; and
(2) the earnings of the corporation;
for all work and labor done and performed by the employees for the
corporation, from the date of the employees employment by the corporation. A
lien under this section shall lie prior to any and all liens created
or acquired subsequent to the date of the employment of the employees by
the corporation, except as otherwise provided in this chapter.
I.C. § 32-8-24-1.
Footnote: On March 21, 2001, Earthco filed a motion requesting permission
from this court to file a motion for relief from judgment pursuant to
Ind. Trial Rule 60(B). To the extent that such motion is not
mooted by this opinion, Earthco may file the motion with the trial court.