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Thomas Jefferson Classical Acad. Charter Sch. v. Cleveland County Bd. of Educ.

Court of Appeals of North Carolina

September 2, 2014


 Heard in the Court of Appeals 23 January 2014.

Opinion filed 3 June 2014.

Petition for Rehearing allowed 10 July 2014.

Page 289

Cleveland County. No. 12 CVS 41.

Robinson Bradshaw & Hinson, P.A., by Richard A. Vinroot and Matthew F. Tilley, for plaintiffs-appellees.

Tharrington Smith, L.L.P., by Deborah R. Stagner, for defendant-appellant.

Allison B. Schafer and Christine T. Scheef for N.C. School Boards Association, amicus curiae.

STROUD, Judge. Judge DILLON concurs. Judge Robert N. HUNTER, JR., concurs in part and dissents in part by separate opinion.


Page 290

STROUD, Judge.

Appeal by defendant from Judgment entered on or about 13 February 2013 and Order and Judgment entered 2 April 2013 by Judge Jesse B. Caldwell III, in Superior Court, Cleveland County.

The Cleveland County Board of Education, d/b/a Cleveland County Schools (" CCS" or " defendant" ), appeals from the judgment entered by the trial court on or about 13 February 2013, wherein it concluded that certain funds that CCS had placed in Fund 8 should have been placed into the local current expense fund and distributed on a pro rata basis to the plaintiff charter schools. CCS also appeals from an order awarding plaintiffs attorneys' fees.

On 3 June 2014, we filed an opinion holding that the 2010 amendments applied to the present case as clarifying amendments. Plaintiffs filed a petition for rehearing, which we allowed. Upon reexamination, we clarify the definition of " restricted" funds as used in our prior case law and applicable to the school year in question without relying on the subsequent amendments. We remand for the trial court to apply the correct definition of " restricted" funds and to make appropriate findings of fact. We reverse the trial court's order awarding attorneys' fees.

I. Background

On 9 January 2012, Thomas Jefferson Classical Academy Charter School, Piedmont Community Charter School, and Lincoln Charter School (" plaintiffs" ) filed a complaint in superior court, Cleveland County, alleging that CCS had failed to pay them the proper per-pupil amount required by statute. Plaintiffs specifically contended that CCS wrongfully moved approximately $4.9 million from the local current expense fund, which must be shared with the charter schools, to a " special revenue fund," which is not shared. Plaintiffs alleged that they were owed approximately $102,480. Plaintiffs sought a declaratory judgment that CCS must allocate the funds as plaintiffs contended the statute required, recovery in the amount of $102,480, and attorneys' fees under N.C. Gen. Stat. § 6-19.1. CCS answered, denying that their transfer of the funds to the special revenue fund violated any of the applicable statutes and that plaintiffs were owed anything.

The case was tried by the superior court sitting without a jury. The parties each presented evidence to support their claims. Plaintiffs primarily relied on the testimony of David Lee, financial director for CCS. Mr. Lee prepared an audit report of CCS' finances, which used various state budget codes for different revenue sources. Many of the funding sources that CSS had placed in the special revenue fund were classified by Mr. Lee as " unrestricted." Defendant presented a number of witnesses who administered various programs within the CCS system who testified about their funding sources and the use of those funds. After two days of testimony, the trial court took the matter under advisement.

The trial court entered its judgment on 21 February 2013, wherein it found that defendant had misappropriated approximately $2,781,281 that should have been placed in the current expense fund rather than the special revenue fund. It found that Mr. Lee had admitted that $2,109,377 of the funds,

Page 291

called " Column A," were " unrestricted." It further found, based on Mr. Lee's testimony and that of the other CCS administrators, that $671,904 of the funds, listed under " Column B" and " Column C" were " (a) part of moneys made available to CCS for its current operating expenses, (b) used by CCS to operate its general K-12 programs and activities, and (c) not restricted to purposes outside CCS's general educational programs." It concluded that defendant owed plaintiffs $57,836 collectively and entered judgment against CCS in that amount. Defendant filed written notice of appeal from the 21 February 2013 judgment on 18 March 2013.

Plaintiffs then filed a petition for attorneys' fees under N.C. Gen. Stat. ยง 6-19.1(a). The trial court, by order and judgment entered 2 April 2013, granted plaintiffs' petition and awarded them $47,195.90 in attorneys' fees. Defendant filed written notice ...

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