Charter Sch. Capital, Inc. v. San Joaquin Cnty. Office of Educ.

CHARTER SCHOOL CAPITAL, INC., Plaintiff and Appellant, v. SAN JOAQUIN COUNTY OFFICE OF EDUCATION, Defendant and Respondent.

C075716

COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (San Joaquin)

January 30, 2019

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 39-2012-00287423-CU-BC-STK)

This case involves a dispute related to the funding of a new charter school in Stockton. "The Legislature is charged with providing a public education system for the citizens of the State of California. [Citations.] It has long done that through the establishment of public school districts [citation] and, more recently, through charter schools as well [citation]." (Today's Fresh Start, Inc. v. Los Angeles County Office of Education (2013) 57 Cal.4th 197, 205 (Today's Fresh Start).) Charter schools are "public schools funded with public money but run by private individuals or entities rather than traditional public school districts." (Ibid.)

In 2012, plaintiff Charter School Capital, Inc. (CSC), was a corporation in the business of contracting with new charter schools to provide them funding for startup and operating expenses incurred prior to their receipt of state public education funds. In exchange, the charter schools would agree to sell CSC their first state-funded payment, known as the advance apportionment payment. In late August 2012, CSC entered into such a contract with Velocity Charter Schools, Inc. (Velocity), and a new charter school in Stockton named Velocity International Science and Technology Academy (VISTA). Less than a month after CSC paid Velocity $543,192, VISTA closed due to low enrollment. Shortly thereafter, defendant San Joaquin County Office of Education (SJCOE) returned VISTA's advance apportionment payment to the California Department of Education (CDE). This lawsuit followed.

The operative complaint alleges one cause of action against SJCOE—failure to perform mandatory duty in violation of Government Code section 815.6.¹ CSC's theory of liability is that SJCOE had a mandatory duty under the Education Code to immediately transfer VISTA's advance apportionment payment to it or VISTA.

After CSC amended its complaint four times, the trial court sustained SJCOE's demurrer to the fourth amended complaint without leave to amend. CSC now appealsfrom the judgment of dismissal, entered in November 2013, after the court's order.² We affirm.

BACKGROUND

Charter Schools

In 1992, with the enactment of the Charter Schools Act of 1992 (Ed. Code, § 47600 et seq.) (Charter Schools Act),³ "California became one of the first states in the country to authorize charter schools—public schools funded with public money but run by private individuals or entities rather than traditional public school districts. The Charter Schools Act . . . authorized various public bodies to approve charters, supervise charter school operations, and revoke charters in the event particular standards and conditions were not met." (Today's Fresh Start, supra, 57 Cal.4th at p. 205.) "The Legislature intended its authorization of charter schools to improve public education by promoting innovation, choice, accountability, and competition." (Id. at pp. 205-206.) "While charter schools have considerable freedom in their academic approach, they must meet statewide educational standards and use appropriately credentialed teachers." (Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164, 1180 (Wells).) A charter school must also comply with the terms of its charter, the Charter Schools Act, and other specified laws, but it is otherwise exempt from laws governing school districts. (§ 47610.)

A typical county in California "has a county board of education, a county superintendent of education, and a county office of education. [Citations.] The countysuperintendent is the head of the county office; the county board is its governing board." (Today's Fresh Start, supra, 57 Cal.4th at p. 207, fn. 4.)

"Charter schools are initiated by submitting a petition to the chartering authority, generally the governing board of a public school district but occasionally a county board or the State Board of Education." (Today's Fresh Start, supra, 57 Cal.4th at p. 206.) The petition may be submitted to the governing board of the school district for review if it is signed by a number of parents or legal guardians equal to at least half of the estimated enrollment, or signed by a number of teachers equal to at least half the number of teachers anticipated to be employed at the school. (§ 47605, subd. (a)(1)(A) & (B).)

"Once approved, charter schools are operated independently, but are subject to public oversight." (Today's Fresh Start, supra, 57 Cal.4th at p. 206.) "[T]he chartering body . . . is obligated to oversee each charter school under its authority." (San Jose Unified School Dist. v. Santa Clara County Office of Education (2017) 7 Cal.App.5th 967, 972-973.) "Chartering authorities must monitor schools' fiscal condition and academic performance and are authorized to investigate whenever grounds for concern arise. [Citations.] In turn, schools must respond promptly to any reasonable inquiries from public officials charged with oversight." (Today's Fresh Start, supra, 57 Cal.4th at p. 206.)

"Though independently operated, charter schools fiscally are part of the public school system; they are eligible equally with other public schools for a share of state and local education funding. [Citations.] This hybrid nature results in a complicated relationship with other public schools. 'Obviously charter schools are not in opposition to the public school system. On the contrary, they are a part of that system.' [Citation.] Nevertheless, 'charter schools compete with traditional public schools for students, and they receive funding based on the number of students they recruit and retain at theexpense of the traditional system.' " (Today's Fresh Start, supra, 57 Cal.4th at pp. 206-207.)

The Education Code provides that the state Controller during each fiscal year shall transfer from the General Fund of the state to the State School Fund a specified amount per student. (§ 14002, subd. (a).) The state Superintendent of Public Instruction is required to certify to the Controller the amounts estimated to be apportioned to each school district during the ensuing fiscal year. (§ 41330.) A charter school is considered a " 'school district' " for purposes of receiving state public education funds. (§ 47612, subd. (c).)

Charter schools are entitled "to full and fair funding." (§ 47615, subd. (a)(3).) Each charter school must be provided with operational funding that is equal to the total funding that would be available to a similar school district serving a similar student population. (§ 47630, subd. (a).) "Like traditional public schools, charter schools are funded by the state based on ADA [i.e., average daily attendance] records." (Wells, supra, 39 Cal.4th at p. 1180.)

"[A] charter school in its first year of operation shall be eligible to receive funding for the advance apportionment [of state aid] based on an estimate of average daily attendance for the current fiscal year, as approved by the local educational agency that granted its charter and the county office of education in which the charter-granting agency is located . . . Not later than five business days following the end of the first 20 schooldays, a charter school receiving funding pursuant to this section shall report to the [Department of Education] its actual average daily attendance for that first month, and the Superintendent [of Public Instruction] shall adjust immediately, but not later than 45 days, the amount of its advance apportionment accordingly." (§ 47652, subd. (a).)

"[A]lthough [state public education] funds received by school districts are to be paid into the county treasury for the credit of the district [citations], . . . ' "[s]choolmoneys belong to the state and the apportionment of funds to a school district does not give the district a proprietary interest in the funds. . . ." ' " (Kirchmann v. Lake Elsinore Unified School Dist. (2000) 83 Cal.App.4th 1098, 1111.) "If a charter school ceases to exist, its [students] are reabsorbed into the district's mainstream public schools, and the [average daily attendance] revenues previously allotted to the charter school for those [students] revert to the district." (Wells, supra, 39 Cal.4th at p. 1202.)

Operative Pleading

The following facts are taken from the operative complaint (fourth amended complaint) and the exhibits attached thereto.

In 2012, CSC was a corporation in the business of providing funding to new charter schools in advance of their receipt of the initial aid payment made by the state (i.e., CDE). CSC would enter into contracts with charter schools to purchase their state public education funds.

VISTA was a charter school established in 2012. It was located in Stockton and operated by Velocity, a California nonprofit public benefit corporation. VISTA was in the New Jerusalem School District, which was the chartering authority that approved VISTA's charter school petition.

SJCOE is a local government agency that receives and distributes state public education funding for charter schools in San Joaquin County, including Stockton. According to CSC, SJCOE's role in administering public education funds for charter schools is in the nature of a trustee or fiduciary; it acts as a "pass through entity that transfers funds directly from CDE to the charter schools."

On August 29, 2012, VISTA, Velocity, and CSC entered into a written contract—Receivable Purchase Agreement (RPA)—and executed a Bill of Sale. The RPA provided that Velocity would sell...