Transportation Serv. V. Wake County Bd.

• Decision Date: 04 August 2009
• Docket Number: No. COA08-664.,COA08-664.
• Citation: 680 S.E.2d 223
• Parties: TRANSPORTATION SERVICES OF NORTH CAROLINA, INC. d/b/a Crystal Transportation, Plaintiff, v. WAKE COUNTY BOARD OF EDUCATION, Kathryn Watson Quigg, and William R. McNeal, Defendants.
• Court: North Carolina Court of Appeals

680 S.E.2d 223

TRANSPORTATION SERVICES OF NORTH CAROLINA, INC. d/b/a Crystal Transportation, Plaintiff, v. WAKE COUNTY BOARD OF EDUCATION, Kathryn Watson Quigg, and William R. McNeal, Defendants.

No. COA08-664.

Court of Appeals of North Carolina.

August 4, 2009.

Appeal by defendant Wake County Board of Education from order entered 13 March 2008 by Judge A. Leon Stanback in Wake County Superior Court. Heard in the Court of Appeals 29 January 2009.

Anderson Jones, PLLC, by Matthew Duncan and Todd Jones, Raleigh, for plaintiff-appellee.

Tharrington Smith, L.L.P., by Rod Malone and Neal A. Ramee, Raleigh, for defendant-appellant Wake County Board of Education.

GEER, Judge.

Defendant Wake County Board of Education ("the Board") appeals from the trial court's denial of its motion to dismiss the breach of contract action brought by plaintiff Transportation Services of North Carolina, Inc., doing business as Crystal Transportation ("Crystal"). The Board contends the contract it entered into with Crystal is invalid and unenforceable because it lacked the preaudit certificate required by N.C. Gen. Stat. § 115C-441(a) (2007). This Court held in Data Gen. Corp. v. County of Durham, 143 N.C.App. 97, 103, 545 S.E.2d 243, 247-48 (2001), that the lack of a preaudit certificate renders a contract invalid and unenforceable under N.C. Gen.Stat. § 159-28(a) (2007), a statute essentially identical to N.C. Gen.Stat. § 115C-441(a), but applicable to local governments rather than school boards. We hold that Data General is dispositive in this case and, therefore, conclude that the trial court erred in denying the Board's motion to dismiss.

Facts

This appeal arises out of a contract dispute between Crystal and the Board. Crystal has provided transportation for special needs students in the Wake County public school system for over 10 years. For the 1996-1997 school year, the Board orally agreed to compensate Crystal for its services on a per-mile-traveled basis. For the 1997-1998 school year, the Board orally agreed to compensate Crystal for its services on a per-student-assigned basis rather than on a per-mile-traveled basis. Under the terms of that agreement, the Board compensated Crystal for each student it was assigned to transport, regardless whether the student was actually transported that day. Thus, Crystal was entitled to compensation for the following students it did not actually transport: (1) those students who attended year-round schools, but were "tracked out"; and (2) pre-Kindergarten students who did not attend school on Fridays.

At the end of the 1997-1998 school year, the parties entered into a written multi-year contract terminating in 2003 under which the same compensation scheme was adopted. The Board paid Crystal under this contract through the 2001-2002 school year. In 2002, the parties entered into a new contract that contained the same terms and was to extend until 2008. The Board subsequently refused to pay Crystal for the students that were not actually transported because their year-round schools were not in session or because they did not attend school on Fridays.

On 19 September 2007, Crystal brought suit against the Board in Wake County Superior Court for breach of contract. Attached to the complaint was a copy of the 2002 contract. The Board filed a motion to dismiss on 27 November 2007 and an amended motion to dismiss on 13 December 2007. In the amended motion to dismiss, the Board contended that the 2002 contract was "void, invalid, and unenforceable on its face pursuant to N.C. Gen.Stat. § 115C-441(a)."

On 31 December 2007, Crystal filed an amended complaint in which it carried over its breach of contract claims and added three new claims. First, Crystal contended the Board was estopped from arguing that the 2002 contract was invalid because it had accepted benefits from that contract for six years. Crystal also asserted a claim for negligent misrepresentation against the Board, and a claim for negligence against defendant Kathryn Watson Quigg, the former chair of the Board and defendant William R. McNeal, the former secretary of the Board. Crystal also alleged that "a pre-audit was in fact performed," but did not allege that a preaudit certificate existed or was affixed to the 2002 contract.

On 24 January 2008, the Board filed a motion to dismiss Crystal's amended complaint for failure to state a claim under Rule 12(b)(6) and for lack of personal jurisdiction under Rule 12(b)(2) of the Rules of Civil Procedure, arguing that the 2002 contract was invalid and unenforceable under N.C. Gen.Stat. § 115C-441(a) and that all defendants were protected from suit by the doctrine of governmental immunity. On 13 March 2008, the trial court entered an order granting in part and denying in part the Board's motion.

The trial court granted the Board's motion to dismiss Crystal's claims for negligent misrepresentation and negligence against the Board, Quigg, and McNeal for failure to state a claim for relief and for lack of personal jurisdiction on the basis of governmental and public official immunity. The trial court denied the Board's motion to dismiss Crystal's breach of contract and estoppel claims. The Board timely appealed to this Court.

I

This Court reviews de novo a trial court's ruling on a motion to dismiss.¹ "`[T]he question for the court is whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory, whether properly labeled or not.'" Leary v. N.C. Forest Prods., Inc., 157 N.C.App. 396, 400, 580 S.E.2d 1, 4 (quoting Grant Constr. Co. v. McRae, 146 N.C.App. 370, 373, 553 S.E.2d 89, 91 (2001)), aff'd per curiam, 357 N.C. 567, 597 S.E.2d 673 (2003).

N.C. Gen.Stat. § 115C-441(a) provides, in part, that

no obligation may be incurred by a local school administrative unit unless the budget resolution includes an appropriation authorizing the obligation and an unencumbered balance remains in the appropriation sufficient to pay in the current fiscal year the sums obligated by the transaction for the current fiscal year. If an obligation is evidenced by a contract or agreement requiring the payment of money or by a purchase order for supplies and materials, the contract, agreement, or purchase order shall include on its face a certificate stating that the instrument has been preaudited to assure compliance with this section.

(Emphasis added.) It further provides that "[a]n obligation incurred in violation of this section is invalid and may not be enforced." Id.

The North Carolina appellate courts have not previously considered the effect of the omission of a preaudit certificate from a contract with a school board in violation of N.C. Gen.Stat. § 115C-441(a). This Court has held, however, that a contract with a local government that has no preaudit certificate is invalid under N.C. Gen.Stat. § 159-28(a), an almost identical statute that applies to local governments. The text of N.C. Gen. Stat. § 159-28(a) closely parallels that of N.C. Gen.Stat. § 115C-441(a), providing that "[i]f an obligation is evidenced by a contract or agreement requiring the payment of money or by a purchase order for supplies and materials, the contract, agreement, or purchase order shall include on its face a certificate stating that the instrument has been preaudited to assure compliance with this subsection."

In Data General, 143 N.C.App. at 99, 545 S.E.2d at 245, the County of Durham entered into a lease with Data General for computer hardware and software. Data General filed suit for breach of contract, quantum meruit, estoppel, and negligent misrepresentation, contending that the County kept and used the equipment for almost two years without making payments to Data General. Id. The trial court denied the County's motion to dismiss. Id. On appeal, this Court held that the contract was unenforceable under N.C. Gen.Stat. § 159-28(a) because the contract was missing its preaudit certificate. 143 N.C.App. at 103, 545 S.E.2d at 248. The Court explained:

In the instant case, Data General has failed to make a showing that the required preaudit certificate exists, and none is evidenced in the record. Furthermore, Durham County has argued that no such certificate exists. As there is insufficient evidence in the record that the requirements of N.C. Gen.Stat. § 159-28(a) have been met, we conclude that no valid contract was formed between Data General and Durham County, and Durham County therefore has not waived its sovereign immunity to be sued (and Data General may not maintain a suit) for contract damages.

Id., 545 S.E.2d at 247-48.

This Court has applied this same principle in several other cases. See Finger v. Gaston County, 178 N.C.App. 367, 370, 631 S.E.2d 171, 173 (2006) (upholding trial court's grant of summary judgment where plaintiff's agreement with county did not have preaudit certificate); L & S Leasing, Inc. v. City of Winston-Salem, 122 N.C.App. 619, 623, 471 S.E.2d 118, 121 (1996) (upholding trial court's grant of summary judgment to city on plaintiff's breach of contract claim because contract lacked preaudit certificate); Cincinnati Thermal Spray, Inc. v. Pender County, 101 N.C.App. 405, 408, 399 S.E.2d 758, 759 (1991) (affirming Rule 12(b)(6) dismissal of plaintiff's breach of contract claim where contract between parties did not have preaudit certificate); see also Cabarrus County v. Systel Bus. Equip. Co., 171 N.C.App. 423, 426, 614 S.E.2d 596, 598 (reversing trial court's order enforcing settlement agreement where preaudit certificate was not signed by finance officer), disc. review denied, 360 N.C. 61, 621 S.E.2d 177 (2005).

A court "must be guided by the `fundamental rule of statutory construction that statutes in pari materia, and all parts thereof, should be construed together and compared with each other.'" Martin v. N.C. Dep't of Health & Human Servs., ___ N.C.App. ___, 670 S.E.2d...