Banyan GW, LLC v. Wayne Preparatory Acad. Charter Sch., Inc.
| Decision Date | 05 February 2019 |
| Docket Number | No. COA18-378,COA18-378 |
| Citation | 822 S.E.2d 791 (Table) |
| Parties | BANYAN GW, LLC, Plaintiff, v. WAYNE PREPARATORY ACADEMY CHARTER SCHOOL, INC. and its Board of Directors; Sharon Thompson, Chair of the Board of Directors; and John Ankeney, and Lucius J. Stanley, as members of the Board of Directors, and Vertex III, LLC, Defendants. |
| Court | North Carolina Court of Appeals |
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., Raleigh, by J. Mitchell Armbruster, for plaintiff-appellee.
Haithcock, Barfield, Hulse & Kinsey, P.L.L.C., Goldsboro, by Glenn A. Barfield, and Robinson, Bradshaw & Hinson, P.A., Charlotte, by Richard A. Vinroot, for defendant-appellant Wayne Preparatory Academy Charter School, Inc.
Miazzo Schaffer Webb Law, PLLC, by W. Lewis Glenn III, for defendant-appellant Vertex III, LLC.
In this breach of contract case, Wayne Preparatory Academy Charter School, Inc. ("WPA") appeals from the trial court’s order granting partial summary judgment in favor of Banyan, GW LLC ("Banyan") and against WPA in the amount of $500,000. In its appeal, WPA contends that the trial court’s order was erroneous because the contract at issue was unenforceable on several grounds and the liquidated damages provision that served as the basis for the court’s award constituted an impermissible penalty clause. Based on our thorough review of the record and applicable law, we affirm the trial court’s award against WPA.
WPA is a non-profit corporation organized in 2009 for the purpose of opening a charter school in Wayne County, North Carolina. WPA subsequently submitted an application to the North Carolina State Board of Education ("SBE") for approval to open a charter school, but this application was denied.
At some point thereafter, Dr. Ken Benton, who was WPA’s chairman at the time, met J. Richard Walker, the managing member of Banyan. Walker told Dr. Benton that he had "extensive experience in assisting North Carolina nonprofits apply for charters and in operating charter schools after their charters were approved." Walker further informed Dr. Benton that Banyan could "provide a turn-key job in preparing the application, finding funding for construction of facilities, and management of the operational aspects of the school after the charter was approved."
On 1 March 2013, WPA submitted a new application (the "Charter Application") to the SBE. The Charter Application was primarily prepared by Walker and others at Banyan but did not identify Banyan’s relationship with WPA. In the section of the Charter Application asking whether "[t]he proposed school ... intend[s] to contract with an education service provider" — described as an "Educational Management Organization or Charter Management Organization" — the box labeled "Not Applicable" was marked. The SBE ultimately approved the Charter Application and issued a charter to WPA (the "WPA Charter").
In December 2013, Banyan and WPA entered into a "Support Services Agreement" ("SSA"), each page of which was initialed by both Dr. Benton and Walker. The SSA set out in detail a variety of support services that Banyan would provide to WPA for an annual fee of $258,000 plus $295 for each student enrolled at the school in excess of 700 students. It also contained a liquidated damages clause in the event that the contract was ever breached by WPA. The SSA provided that it would remain in effect until 2019 and was then subject to being renewed for additional years.
WPA also retained a company called Vertex III, LLC, ("Vertex III"), a subsidiary of Vertex Nonprofit Organization ("Vertex NP"), for assistance in obtaining funding for the school. WPA and Vertex III entered into a lease agreement on 10 February 2014, pursuant to which WPA would make monthly rental payments to Vertex III for its use of the property where the charter school was to be located.
WPA’s charter was approved by the SBE effective 1 July 2014, and the school was opened to students the following month. After WPA had been operating the school for approximately one year, it received a letter dated 31 August 2015 from the Office of Charter Schools (the "OCS") — a division of the North Carolina Department of Public Instruction. The letter stated the OCS’s concern that although the Charter Application had represented that WPA would not be contracting with an Educational Management Organization ("EMO"), Banyan was, in fact, providing "services equivalent of an EMO" such that WPA was in violation of its charter. This letter (the "OCS Letter") proceeded to inform WPA that it must either terminate its relationship with Banyan or amend the Charter Application "to show an agreement with [Banyan]." Finally, the OCS Letter noted that any amendment to the charter would be subject to approval by the SBE.
Less than two months later, Vertex III issued a notice of default to WPA under the terms of the lease agreement after WPA failed to pay its monthly rent. The notice of default provided that Vertex III would consider exercising its right under the agreement to be "appointed as interim manager" of WPA and enact "cost-saving measures, including ... the dismissal, termination, or cancellation of all third party vendors, employees, or independent contractors." Vertex III also made a new loan to WPA during October of 2015 and informed WPA "that the funds could be used for any legitimate purpose by the school, including negotiation or litigation with Banyan."
On 20 October 2015, the WPA board voted to terminate the SSA. Banyan’s office manager was immediately escorted off of the school premises. No further payments were made by WPA to Banyan under the SSA.
On 6 January 2016, Banyan filed a complaint in Wake County Superior Court alleging breach of contract against WPA, its Board of Directors, and board members Sharon Thompson, John Ankeney, and Lucius J. Stanley (collectively the "WPA Defendants"). The complaint also asserted a claim for tortious interference with contract against Vertex III and Vertex NP. Vertex III and Vertex NP filed an answer and motion to dismiss on 10 March 2016, arguing, in part, that the action should be dismissed against Vertex NP pursuant to Rule 12(b)(2) of the North Carolina Rules of Civil Procedure for lack of personal jurisdiction. The WPA Defendants filed an answer on 15 March 2016, in which they raised a number of affirmative defenses, including that the SSA was unconscionable, contrary to public policy, and unenforceable as an illusory contract. In addition, the WPA Defendants asserted counterclaims against Banyan for fraud, "breach of fiduciary duty/constructive fraud," malicious prosecution, abuse of process, and unfair and deceptive trade practices.
On 10 March 2017, Vertex III filed a motion for summary judgment pursuant to Rule 56 as to Banyan’s tortious interference with contract claim. Vertex III and Vertex NP also filed a motion to dismiss the tortious interference with contract claim pursuant to Rule 12(b)(6) and a motion for judgment on the pleadings as to that claim based on Rule 12(c).
The WPA Defendants filed a motion for summary judgment on 3 April 2017 in which they argued that the SSA was unenforceable as a result of the affirmative defenses contained in their answer. On 20 September 2017, Banyan filed a cross-motion for summary judgment, asserting that there was "no genuine issue of material fact that the contract provide[d] for liquidated damages of at least $500,000 for breach of contract" and that, for this reason, it was "entitled to a partial damage judgment of at least $500,000 against WPA."
On 25 September 2017, a hearing was held on the pending motions before the Honorable Carl R. Fox. The trial court entered an order on 6 November 2017, stating, in pertinent part, as follows:
There is no genuine issue of material fact that (a) WPA entered into a contract with Banyan ..., (b) WPA breached the contract by early termination not permitted by the terms of the contract, and (c) the contract provides for a minimum liquidated damages award of $500,000; and that therefore the Motion for Summary Judgment of WPA should be denied and the cross-motion for Partial Summary Judgment of Banyan should be granted in favor of Banyan on their claim of breach of contract against WPA, in the amount of $500,000 in liquidated damages.
The 6 November order also denied Vertex III’s motion for summary judgment on the ground that genuine issues of material fact existed as to Banyan’s claim against it. The WPA Defendants and Vertex III filed a joint notice of appeal on 9 November 2017.1
As an initial matter, we must determine whether this appeal is properly before us. See Hous. Auth. of City of Wilmington v. Sparks Eng’g, PLLC , 212 N.C. App. 184, 187, 711 S.E.2d 180, 182 (2011) .
"A final judgment is one which disposes of the cause as to all the parties, leaving nothing to be judicially determined between them in the trial court." Duval v. OM Hospitality, LLC , 186 N.C. App. 390, 392, 651 S.E.2d 261, 263 (2009) (citation omitted). Conversely, an order or judgment is interlocutory if it does not settle all of the issues in the case but rather "directs some further proceeding preliminary to the final decree." Heavner v. Heavner , 73 N.C. App. 331, 332, 326 S.E.2d 78, 80 (citation omitted), disc. review denied , 313 N.C. 601, 330 S.E.2d 610 (1985).
"Generally, there is no right of immediate appeal from interlocutory orders and judgments." Paradigm Consultants, Ltd. v. Builders Mut. Ins. Co. , 228 N.C. App. 314, 317, 745 S.E.2d 69, 72 (2013) (citation and quotation marks omitted). The prohibition against interlocutory appeals "prevents fragmentary, premature and unnecessary appeals by permitting the trial court to bring the case to final judgment before it is presented to the appellate courts."...
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