Appeal from the Iowa District Court for Clinton County, Gary D. McKenrick, Judge. A school district appeals a summary judgment ruling finding as a matter of law a whole grade sharing agreement entered into by a predecessor school district that merged into the reorganized school district did not bind the reorganized school.
Andrew J. Bracken of Ahlers & Cooney, P.C., Des Moines, for appellant.
Brian L. Gruhn of Gruhn Law Firm, Cedar Rapids, for appellee.
Prior to a reorganization merging two school districts, one of the two districts entered into a whole grade sharing agreement with a third district. On a motion for summary judgment filed by the reorganized school district, the district court found as a matter of law the whole grade sharing agreement did not bind the reorganized school district. On appeal, we find the whole grade sharing agreement can bind the reorganized school district. Accordingly, we reverse the judgment entered by the district court in favor of the reorganized district and remand the case back to the district court for further proceedings consistent with this opinion.
I. Background Facts and Proceedings.
This case involves three small school districts, two of which reorganized into one new school district, giving rise to the present litigation. Northeast Community School District (Northeast), East Central Community School District (East Central),
and Preston Community School District (Preston) were contiguous school districts located in Clinton County and Jackson County. Beginning in 1986, the three school districts periodically had discussions regarding a possible reorganization and merger or whole grade sharing agreements between two or more of the districts.
In October 2009, Northeast and East Central held a joint board of education meeting to discuss the possibility of entering into a whole grade sharing agreement. By June 2010, the school boards of Northeast and East Central agreed to begin the process required for a whole grade sharing agreement, and they held public hearings on the matter. On June 23, East Central and Northeast executed a one-way whole grade sharing agreement (Agreement). The Agreement provided East Central would send its seventh through twelfth grade students to Northeast for all classes and extracurricular activities. In exchange for Northeast taking these students, East Central agreed to provide transportation to its students to the neighboring high school, pay the students' tuition, and pay a portion of its teacher salary supplement funds to Northeast. The tuition was approximately ninety percent of the state aid East Central received for the students at issue. The two school districts also entered into a facility improvement program agreement on the same day, wherein East Central agreed to pay a portion of its local option sales tax to Northeast to benefit the East Central students attending Northeast. The Agreement became effective at the start of the 2011-2012 school year.
The Agreement was to run for three years and renew each year thereafter, with a three-year term in effect at all times. If either school board wanted to terminate the Agreement, it could give notice no later than December 15 and the Agreement would terminate at the end of the third school year following the notice, or the parties could mutually agree to terminate the contract at the end of any school year. In August 2011, the districts renewed and amended the Agreement to include " successors" of East Central in the Agreement.
At the same time East Central and Northeast were discussing and entering into the Agreement, citizens from Preston and East Central began the process to reorganize their districts and merge the districts together. On May 3, 2010, the citizens delivered a petition for the reorganization of Preston and East Central to the Mississippi Bend Area Education Agency (AEA). The AEA held a public hearing on the petition on June 16. At the public hearing, the AEA was told East Central and Northeast had recently held public hearings on the whole grade sharing agreement and were in the process of approving an agreement between the districts. At the conclusion of the public hearing, the AEA approved a public vote on the petition for reorganization. Due to litigation between East Central and the AEA challenging the validity of the petition and its process, the residents did not vote on the reorganization petition until September 11, 2012, during the second year of the Agreement. The reorganization passed with a very slim majority in the East Central district and an overwhelming majority in the Preston district. The reorganization created a new school district called Easton Valley Community School District (Easton). Sometime between September and December 14, Easton residents elected a new school board, as is required by Iowa Code section 275.25 (2013). The new board began undertaking the tasks necessary to manage Easton.
On December 14, the Easton school board sent a notification of cancellation of
the Agreement to the superintendent of Northeast. The letter stated that Easton reviewed the Agreement and determined that because they were not a party to the Agreement, when East Central ceased to exist the Agreement was null. Further, Easton used this letter as a notice of intent to cancel the Agreement as well, while still asserting the Agreement did not apply to Easton.
Because of this communication, Northeast filed a petition for declaratory action and mandamus in February 2013. Northeast asserted Easton was a successor to East Central and therefore was bound to the contractual obligation of East Central that remained after the reorganization. Pursuant to Iowa Code section 275.24, the reorganization became effective July 1. In August, it became clear to Northeast that Easton intended to breach the ...