Dowling v. Stapley

• Decision Date: 16 April 2009
• Docket Number: No. 1 CA-CV 07-0745.,No. 1 CA-CV 07-0891.,1 CA-CV 07-0745.,1 CA-CV 07-0891.
• Citation: 211 P.3d 1235,221 Ariz. 251
• Parties: Dr. Sandra DOWLING, in her official capacity as Superintendent of Schools, Maricopa County, Arizona, and as ex officio Member of the Governing Board of Maricopa County Regional School District No. 509, Plaintiff/Counter-Defendant/ (CV 2006-014285) Defendant/Counterclaimant/(CV 2006-052611)/Appellant, v. Don STAPLEY; Fulton Brock; Andrew Kunasek; Mary Rose Wilcox; and Max W. Wilson, in their official capacities as members of the Board of Supervisors, Maricopa County, Arizona, Intervenors (CV 2006-014285)/Defendants/Counter-Claimants/ Third-Party Plaintiffs (CV 2006-052611)/Appellees, and David Schweikert, in his official capacity as Maricopa County Treasurer, Plaintiff/Counter-Defendant (CV 2006-014285)/Third-Party Defendant (CV 2006-052611)/Appellee, and Maricopa County Regional School District No. 509, Defendant/Counterclaimant (CV 2006-014285)/Plaintiff/Counter-Defendant (CV 2006-052611) Appellee.
• Court: Arizona Court of Appeals

211 P.3d 1235

221 Ariz. 251

Dr. Sandra DOWLING, in her official capacity as Superintendent of Schools, Maricopa County, Arizona, and as ex officio Member of the Governing Board of Maricopa County Regional School District No. 509, Plaintiff/Counter-Defendant/ (CV 2006-014285) Defendant/Counterclaimant/(CV 2006-052611)/Appellant, v. Don STAPLEY; Fulton Brock; Andrew Kunasek; Mary Rose Wilcox; and Max W. Wilson, in their official capacities as members of the Board of Supervisors, Maricopa County, Arizona, Intervenors (CV 2006-014285)/Defendants/Counter-Claimants/ Third-Party Plaintiffs (CV 2006-052611)/Appellees, and David Schweikert, in his official capacity as Maricopa County Treasurer, Plaintiff/Counter-Defendant (CV 2006-014285)/Third-Party Defendant (CV 2006-052611)/Appellee, and Maricopa County Regional School District No. 509, Defendant/Counterclaimant (CV 2006-014285)/Plaintiff/Counter-Defendant (CV 2006-052611) Appellee.

No. 1 CA-CV 07-0745.

No. 1 CA-CV 07-0891.

Court of Appeals of Arizona, Division 1, Department E.

April 16, 2009.

Cantelme & Brown, P.L.C. By David J. Cantelme, D. Aaron Brown, Samuel Saks, Phoenix, Attorneys for Sandra Dowling/Appellant.

Shughart Thomson & Kilroy, P.C. By Thomas K. Irvine, Rebekah W. Francis, Phoenix, Attorneys for Board of Supervisors, Maricopa County Arizona/Appellees.

Greenberg Traurig, L.L.P. By Pamela M. Overton, Jennifer M. Dubay, Clete P. Samson, Phoenix, Attorneys for David Schweikert and Maricopa County Regional School District No. 509/Appellees.

OPINION

KESSLER, Judge.

¶ 1 Dr. Sandra Dowling, former Maricopa County Superintendent of Schools ("Dowling" or "Superintendent"), appeals from the superior court's order granting the motion of the Maricopa County Board of Supervisors ("Board") to strike her various motions ("Strike Order") in Nos. CV 2006-014285 ("Treasurer Case") and CV 2006-052611 ("District Case").¹ The Superintendent argues that the Strike Order erroneously stripped her of her status as a party and in effect denied her all relief. Additionally, she appeals from the superior court's appointment of receivers, the court's denial of her motion to intervene, and its approval of a settlement among the other parties. For the reasons stated below, we dismiss the appeals from the order appointing receivers and the order approving the settlement, and affirm the orders striking her motions and denying her motion to intervene.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 The procedural history of this litigation, which is the focus of these consolidated appeals, is reminiscent of Daedalus' labyrinth. Like Theseus and Ariadne, we attempt to use a detailed history of the litigation as a thread to guide us through this maze and resolve the issues presented.

Underlying Facts and Dowling's First Special Action

¶ 3 Dowling served as the duly elected Superintendent since 1988, and as such served as the sole member of the Governing Board of the Maricopa County Regional School District, which is also known as the Accommodation School District ("District"). In April 2006, the Board voted unanimously to terminate educational services offered to homeless children and alternative educational programs through accommodation schools as previously offered pursuant to Arizona Revised Statutes ("A.R.S.") section 15-308(B) (Supp.2008).²

¶ 4 On June 1, 2006, the Superintendent filed a special action in superior court seeking declaratory and injunctive relief. Specifically, she requested that the Board's resolution to close the accommodation schools be declared null and void arguing that the Board did not have the authority to close District-run schools for homeless children. The Superintendent also sought to enjoin the Board from taking action to enforce the closure resolution. The superior court accepted jurisdiction and entered a final order granting declaratory, but not injunctive, relief. The Board appealed to this Court, which affirmed the decision as modified. Dowling v. Stapley, 218 Ariz. 80, 179 P.3d 960 (App. 2008) ("Dowling I").³

¶ 5 After the superior court issued its special action ruling, the Board adopted a resolution determining that the District did not need further funding from Maricopa County ("County") for 2006-07 if the District was being properly managed. The Board stated in the resolution that the District had a current fiscal deficit and the Board had attempted to adopt a comprehensive fiscal resolution to deal with the alleged crisis in the District, but that no balanced budget had been presented to it. Accordingly, it found that the District Governing Board was improperly managing the District. It resolved that Dowling as Superintendent should be delegated powers to issue vouchers and warrants so that she would be accountable if any expenditure was improper. It also resolved that since the District should not provide accommodation services after June 30, 2006, no funding was necessary for fiscal year 2006-07.

¶ 6 In September 2006, the Board withdrew authority delegated to the Superintendent to draw warrants against the special county school reserve fund ("Special County Reserve Fund") for the accommodation schools operated by the District. Additionally, the then-County Treasurer David Schweikert ("Treasurer") seized the District's State aid, indicating he would apply the funds against the District's debt owed to the County's general fund. Thus, the District did not receive an advancement of State aid for August and September 2006.⁴

The District and Treasurer File Their Action

¶ 7 In September 2006, Dowling filed a new special action as Superintendent, and as Superintendent, in her capacity as the sole member of the Governing Board of the District ("District Case"). She asked the court to enjoin the Board to provide $1,250,490.00 to the Special County Reserve Fund for necessary expenses to conduct the accommodation school for fiscal year 2006-07. The Board counterclaimed, contending that Dowling, in her role as Superintendent, had received monies from various school districts in the form of an Indirect Cost Fund, and without the Board's permission had transferred $1.9 million from that fund to the District. The Board alleged that Dowling, both as Superintendent and personally, was liable to the County for those funds. The Board also alleged that the District spent $4.3 million more than allotted to it which came from the County Treasurer's Investment Pool held in trust and alleged that the District, its Governing Board, and the Superintendent, were liable for funds that the Treasurer had not yet recouped. Additionally, the Board filed a third party complaint joining the Treasurer to the lawsuit to ensure that any court order returning funds would be properly enforced.

¶ 8 In the meantime, the Treasurer filed his suit against the District and Dowling in her capacity as the sole member of the District's Board. The Treasurer alleged that he maintained funds for the District and that Dowling presented warrants to him which exceeded the District's deposits so that the District had negative balances in its allocated funds. The Treasurer stated he was no longer honoring warrants for the District because the District no longer had access to the County's general fund. The Treasurer had honored warrants in the past out of a pooled account of monies of all school districts held by the Treasurer. He also alleged that the State had notified him that the District did not submit required financial statements and that the State might withhold aid to the District. The Treasurer sought declaratory relief regarding his duties in handling warrants from the District. In response, Dowling filed a counterclaim, seeking declaratory relief that the Treasurer could not set off any warrants he paid from prior years against monies deposited with him by the District. Additionally, she counterclaimed that the Treasurer could not draw funds or place debits on such deposits except upon warrants issued in fiscal year 2006-07 by the Superintendent.

¶ 9 In the Treasurer Case, Dowling moved for a restraining order, temporary stay, and preliminary injunction consistent with her counterclaim. The court granted temporary relief to Dowling until a fuller evidentiary hearing could be held. Ultimately, the court continued the temporary restraining order against the Treasurer and granted the Board's motion to consolidate the District and Treasurer actions.

¶ 10 In October 2006, the superior court issued a preliminary injunction restraining the Treasurer from: (1) Setting off any warrants he paid as a county expenditure from prior years against money placed on deposit with the Treasurer by the District in fiscal year 2006-07; and (2) Drawing funds from or placing debts against any monies placed on deposit with the Treasurer in fiscal year 2006-07 by the District or on its behalf.⁵ In a separate minute entry, the court indicated that the Treasurer had acted properly when he treated past warrants in excess of the District's available cash balances as general county expenditures, and could continue to do so until the Board and the Superintendent reached an intergovernmental agreement to determine the extent of each party's responsibilities regarding the accommodation schools. The court also indicated that it intended to appoint a mediator to resolve an impasse in reaching an intergovernmental agreement. By November 22, 2006, those mediation efforts appeared to be less than productive and the court indicated to the parties that they had several days to successfully complete the mediation or it would appoint a receiver for the District.

The Court Appoints a Receivership Board

¶ 11 On November 28, 2006, the Board filed a motion for appointment of a receiver for the District in the District Case. The Board alleged the District was insolvent as a result of being grossly mismanaged and the court could act in its equitable powers to appoint a receiver. The Superintendent opposed the Board's ...