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Charter Day School, Inc. v. The New Hanover County Bd. of Educ.

Court of Appeals of North Carolina

February 18, 2014

CHARTER DAY SCHOOL, INC., Plaintiff-Appellee,
v.
The NEW HANOVER COUNTY BOARD OF EDUCATION and Tim Markley, Superintendent in his Official Capacity, d/b/a

Heard in the Court of Appeals 23 October 2013.

Page 230

Appeal by defendant from order and judgment entered 4 December 2012 by Judge W. Douglas Parsons in New Hanover County Superior Court.

Shipman & Wright, LLP, Wilmington, by Gary K. Shipman and Gregory M. Katzman, for plaintiff-appellee.

Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., Greensboro, by Jill R. Wilson, Robert J. King, III, and Jennifer K. Van Zant, for defendant-appellant.

Allison B. Schafer and Christine T. Scheef for the North Carolina School Boards Association, amicus curiae.

Page 231

McCULLOUGH, Judge.

Defendant, New Hanover County Board of Education d/b/a New Hanover County Schools (" NHCS" ), appeals from the order and judgment entered by the trial court on 4 December 2012. For the following reasons, we reverse in part and affirm in part.

I. Background

Plaintiff, Charter Day School, Inc. (" Charter Day" ), is a charter school in Brunswick County that provides free public education to students from various southeastern North Carolina counties, including New Hanover County. As a public school, see N.C. Gen. Stat § 115C-238.29E(a) (2013) (" A charter school that is approved by the State shall be a public school within the local school administrative unit in which it is located." ), Charter Day is entitled to state and local funding. Specifically, for the time period pertinent to this case, N.C. Gen.Stat. § 115C-238.29H (the " Charter School Funding Statute" ) provided, " [i]f a student attends a charter school, the local school administrative unit in which the child resides shall transfer to the charter school an amount equal to the per pupil local current expense appropriation to the local school administrative unit for the fiscal year." N.C. Gen.Stat. § 115C-238.29H(b) (2007).[1]

On 30 June 2011, Charter Day commenced this action against NHCS and Al Lerch, in his official capacity as Superintendent of NHCS, by filing a complaint in New Hanover County Superior Court.[2] In the complaint, Charter Day asserted two claims for relief: (1) a declaratory judgment that NHCS failed to transfer all amounts owed to Charter Day under the Charter School Funding Statute from the time Charter Day opened, the 2001-2002 fiscal year ending 30 June 2002, through the 2010-2011 fiscal year ending 30 June 2011; and (2) a judgment against NHCS to recover the amount Charter Day alleged to be underfunded. By amended complaint filed shortly thereafter, Charter Day replaced defendant Al Lerch, who retired prior to the commencement of the action, with Tim Markley, the superintendent of NHCS at the time. NHCS and Tim Markley (together " defendants" ) answered the complaint on 1 September 2011.

On 12 April 2012, Charter Day filed a motion for partial summary judgment on defendants' seventh and eighth defenses, in which defendants alleged " Charter Day School is not a legitimate non-profit entity, as required by North Carolina law for the operation of a charter school." Thereafter, on 25 April 2012, defendants filed their own motion for partial summary judgment on Charter Day's claims for the 2001-2002 through 2006-2007 fiscal years on the ground that the claims were barred by the applicable three-year statute of limitations. Both partial summary judgment motions came on for hearing in New Hanover County Superior Court on 7 May 2012, the Honorable W. Allen Cobb, Jr., Judge presiding. Following the hearing, the trial court granted the motions in separate 14 May 2012 orders.

On 22 June 2012, Charter Day filed a motion for summary judgment on the remaining issues. Charter Day's motion came on for hearing in New Hanover County Superior Court before the Honorable W. Douglas Parsons on 5 July 2012.

On 17 July 2012, the trial court filed an order for partial summary judgment in favor of Charter Day. The trial court concluded defendants' " methods for calculating the per pupil local current expense appropriation for the fiscal years in question (2008, 2009 and 2010)[was] improper, as a matter of law [.]" Specifically, defendants " were required to include the entire Fund Balance for the fiscal years in question, and not just the ‘ modified’ or ‘ appropriated’ Fund Balance[,]" and defendants " improperly included ‘ pre-Kindergarten’ (‘ pre-K’ ) students in their total student enrollment[.]" The trial court did not, however, grant Charter Day's motion for summary judgment " as to the amounts due from

Page 232

the [d]efendants[.]" Instead, the trial court ordered defendants to " re-calculate its' Funding Formula for the fiscal years in question[ ] ... [and] provide its re-calculated per pupil allocation for the years in question for the pupils attending [Charter Day] to [Charter Day]" within ninety (90) days.

Defendants filed a submission regarding per pupil allocations for the fiscal years in question on 12 October 2012 and a revised submission on 20 November 2012.

Following the submissions of defendants' recalculations, the trial court filed a final order and judgment on 4 December 2012. In the order and judgment, the trial court reiterated its prior determination that " [d]efendants' method for calculating the per pupil local current expense appropriation for the fiscal years in question was improper, as a matter of law, and failed to comply with the requirements of [N.C. Gen.Stat.] § 115C238.29H(b), in that the [d]efendants did not include the entire Fund Balance in the numerator and included pre-K students in the denominator." Then, based on defendants' submissions regarding per pupil allocations, the trial court entered judgment against NHCS in favor of Charter Day in the amount of $138,878.91. Additionally, the trial court dismissed all claims against Tim Markley and ordered NHCS, " [s]ubject to any subsequent changes in the law," to " transfer to [Charter Day] an amount equal to the per pupil local current expense appropriation for each student enrolled in a charter school operated by [Charter Day]" in accordance with the order " for all subsequent fiscal years beyond those in question in [the] action[.]"

NHCS filed notice of appeal on 21 December 2012 and execution of the judgment was stayed pursuant to the ...


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