Sch. Dist. of Kan. City v. Miss. Bd. of Fund Comm'rs

• Decision Date: 18 December 2012
• Docket Number: WD 74500,WD 74666.,Nos. WD 74418,s. WD 74418
• Citation: 384 S.W.3d 238
• Parties: The SCHOOL DISTRICT OF KANSAS CITY, MISSOURI, et al., Appellant–Respondent, v. MISSOURI BOARD OF FUND COMMISSIONERS, et al., Respondent–Appellant, Missouri Charter Public School Association, et al., Respondent–Appellant, Gordon Parks Elementary School, Respondent–Appellant.
• Court: Missouri Court of Appeals

384 S.W.3d 238

The SCHOOL DISTRICT OF KANSAS CITY, MISSOURI, et al., Appellant–Respondent,

v. MISSOURI BOARD OF FUND COMMISSIONERS, et al., Respondent–Appellant,Missouri Charter Public School Association, et al., Respondent–Appellant,Gordon Parks Elementary School, Respondent–Appellant.

Nos. WD 74418, WD 74500, WD 74666.

Missouri Court of Appeals, Western District.

Aug. 21, 2012.

As Modified Oct. 2, 2012.

Motion for Rehearing and/or Transfer to Supreme Court Denied Oct. 2, 2012.

Application for Transfer Denied Dec. 18, 2012.

Limitation Recognized

V.A.M.S. § 33.315.

Allan V. Hallquist and Derek T. Teeter, Kansas City, MO, for appellant-respondent.

James R. Layton and Christopher J. Quinn, St. Louis, MO, for respondent-appellant Missouri Board of Fund Commissioners, et al.

Charles W. Hatfield, Jefferson City, MO, for respondent-appellant Missouri Charter Public School Association, et al.

David L. Heinemann, Kansas City, MO, for respondent-appellant Gordon Parks Elementary School.

Before DIV III: VICTOR C. HOWARD, Presiding Judge, JAMES E. WELSH, Chief Judge and CYNTHIA L. MARTIN, Judge.

CYNTHIA L. MARTIN, Judge.

This is an appeal from the trial court's grant of summary judgment in favor of the Kansas City, Missouri School District (“School District”) and against several State boards and entities and several intervenor charter schools. The trial court's Second Amended Memorandum, Order and Judgment entered October 21, 2011 (“Judgment”): (i) awarded the School District a judgment for breach of contract against the State defendants in the amount of $6,162,011; (ii) ordered a State agency to recoup money diverted to charter schools; and (iii) entered a judgment for money had and received against the intervenor charter schools in the amount of $5,082,253. The Judgment further awarded prejudgment and post-judgment interest at the rate of 9% per annum on the monetary awards. The subject matter of the Judgment is integrally interwoven with the lengthy and complex federal desegregation litigation commenced in 1977 by a class of plaintiff schoolchildren against the School District and various State defendants (the “Desegregation Litigation”).¹

We conclude that the trial court erroneously declared and applied the law when it held that the State was foreclosed from denying that it breached a settlement agreement reached with the School District in the Desegregation Litigation. We further conclude that the trial court erroneously declared and applied the law when it entered judgment on the School District's breach of contract claim because the settlement agreement was not an independently enforceable contract. We conclude that the trial court erroneously declared and applied the law when it held that the State's Department of Elementary and Secondary Education violated the Supremacy Clause, federal court orders, and otherwise acted unreasonably, arbitrarily, capriciously, and in abuse of its discretion, in rejecting the School District's request for restoration of money transferred to the charter schools. Finally, we conclude that the trial court erroneously declared and applied the law when it entered judgment on the School District's money had and received claim because the School District cannot establish the essential element that retention of money transferred to charter schools would be unjust, and because the uncontested facts establish that the transfer of money to charter schools was voluntary, an affirmative defense.

We reverse the Judgment and enter the judgment this court ought to give pursuant to Rule 84.14.

Factual and Procedural History ²

The Parties

The plaintiff in this case is the School District.³ The defendants are the Missouri Board of Fund Commissioners, the State of Missouri, the Missouri State Board of Education, the Department of Elementary and Secondary Education, and individually named members of the Board of Fund Commissioners and the Commissioner of Education (hereinafter collectively referred to as the “State”). The Intervenor–Defendants are the Missouri Charter Public School Association and 14 charter schools within the geographic boundaries of the School District (hereinafter collectively referred to as the “Charter Schools”).⁴

The Backdrop of the Desegregation Litigation⁵

In 1977, the School District, the State of Missouri, and other state agencies or representatives ⁶ were named as defendants in the Desegregation Litigation, initiated by a class of plaintiff schoolchildren. Years of protracted litigation resulted in a ruling by the United States District Court for the Western District of Missouri (“Federal District Court”) that the School District and the State were jointly and severally liable for constitutionally prohibited discrimination in the School District and for the resulting costs to remediate the vestiges of discrimination. Jenkins v. State of Missouri, 593 F.Supp. 1485, 1505 (W.D.Mo.1984). The Federal District Court thereafter issued a joint and several injunction requiring the State and the School District to fund compensatory and educational programs and necessary capital improvements in the School District. Jenkins v. State of Missouri, 639 F.Supp. 19 (W.D.Mo.1985) ( aff'd as modified, Jenkins by Agyei v. State of Missouri, 807 F.2d 657 (8th Cir.1986), cert. denied, Jenkins v. Missouri, 484 U.S. 816, 108 S.Ct. 70, 98 L.Ed.2d 34 (1987)). From time to time thereafter, the Federal District Court exercised its authority to modify its remedial orders (collectively “Desegregation Orders).” See, e.g., Jenkins v. Missouri, 672 F.Supp. 400 (W.D.Mo.1987).

The Federal District Court recognized that the School District did not have sufficient revenues to finance its share of the costs of the remedial plan, and that certain Missouri state laws in effect at that time prevented the School District from raising the necessary funds through an increased tax levy. Jenkins, 639 F.Supp. at 45;Jenkins, 672 F.Supp. at 411. The Federal District Court thus mandated a court-ordered increase in the property tax levy, and required the School District to issue leasehold revenue bonds in the total amount of $150,000,000 to be retired within 20 years from the date of issue. Id. at 413. The Federal District Court “earmarked the proceeds of the property tax increase for retirement of capital improvement bonds, with any excess to be used to fund other desegregation costs.” Jenkins by Agyei v. State of Missouri, 855 F.2d 1295, 1309 (8th Cir.1988). The United States Supreme Court upheld the court-ordered property tax increase as the means by which the School District could generate revenue to pay its share of the costs of remediating discrimination. Missouri v. Jenkins, 495 U.S. 33, 58, 110 S.Ct. 1651, 109 L.Ed.2d 31 (1990).

In 1993, the Federal District Court authorized the School District to issue an additional $160,000,000 in leasehold revenue bonds to cover costs associated with court-ordered capital improvements. Jenkins v. Kansas City Missouri School District, 516 F.3d 1074, 1077 n. 6 (8th Cir.2008). No other leasehold revenue bonds were issued by the School District for the purpose of remediating the vestiges of discrimination. Thus, the last of the court-ordered leasehold revenue bonds is set for redemption or final payment by 2014.

On May 21, 1996, the joint and severally liable defendants in the Desegregation Litigation, the School District and the State, entered into a settlement agreement (“Settlement Agreement” or “Agreement”). The plaintiff schoolchildren were not parties to the Settlement Agreement, and did not consent to its terms. The object of the Agreement was to end the joint and several obligations imposed on the State by the Desegregation Orders and to secure the State's dismissal from the Desegregation Litigation.

Paragraph 9 of the Settlement Agreement provided:

This Agreement is contingent upon Court approval, and, except for paragraph 10 ⁷ below, shall not become binding on any of the parties unless and until final court approval, as defined in subparagraph 2, is obtained.

In paragraph 2 of the Settlement Agreement, the State agreed to pay, and the School District agreed to accept, $314,000,000 paid over three years as the agreed upon amount of the State's share of the remaining cost to remediate the vestiges of discrimination. A preamble to the Agreement stated the expectation that “the State will have fulfilled its constitutional obligations with the payments set forth in this Agreement.” In paragraph 2, “final court approval” was defined as “when the District Court approves the Agreement and such approval has been upheld by the appellate courts, or all appeals or requests for review have been dismissed, whichever occurs earlier.”

In paragraph 4, the Agreement provided that:

Upon final approval of this Agreement by the Court and the payment of all amounts set forth in paragraph 2 above, the parties agree that the State shall be entitled to a Court order (a) dissolving all outstanding injunctions against it in the Lawsuit, (b) dismissing with prejudice any and all claims, causes of action or appeals that have been made against the State or could have been made in the Lawsuit, and (c) fully relinquishing jurisdiction over the State in the Lawsuit.... [T]he State shall ... be entitled to the aforesaid court order without further hearing or notice.

Paragraph 3 of the Agreement provided, in pertinent part that:

The payment by the State of the amounts set forth in paragraph 2 above shall complete the State's obligation to fund or otherwise provide for desegregation remedies in the [School District].

Finally, paragraph 8 of the Agreement provided that:

[The School District's] property tax levy is currently set at $4.96 pursuant to Court order establishing that rate as the maximum limitation on the local school property tax, and [School District] Board action setting that rate. The parties shall jointly support existing court-ordered financing, except for any orders requiring State...