Lead Opinion
{¶ 3} In October of 2003, the School District submitted its plan and five-year forecast. The five-year forecast projected a deficit in fiscal year 2005. The School District was notified that it was required to submit a plan addressing those deficits and that a failure to do so could result in the district being placed in a "fiscal caution" category. The School District took action resulting in the loss of employment for several teachers who were members of the Association.
{¶ 4} In October 2004, the School District submitted its plan which covered the current 2005 fiscal year and its five-year forecast. The School District's forecast projected a deficit for fiscal year 2007. Accordingly, the School District was again notified that it needed to submit a proposal that would allow the School District to avoid this projected future deficit. It was also informed that failure to submit a plan would result in being placed in fiscal caution.
{¶ 5} On October 24, 2005, the Association filed a complaint seeking declaratory judgment and injunctive relief against the State Board, the ODE and the School District. The complaint alleged three claims. First, the Association claimed *3
that the ODE and the State Board exceeded its statutory authority under R.C.
{¶ 6} In response to this complaint, the State Board, the ODE, and the School District each moved to dismiss the complaint for failure to state a claim upon which relief could be granted pursuant to Civ.R. 12(B)(6). On June 5, 2006, the trial court granted the motions to dismiss based upon the fact that these matters had already been presented to an arbitrator and that the instant action was merely an improper appeal of the Arbitrator's Decision. In coming to that conclusion, the trial court relied upon the Arbitrator's Decision which was attached to the School District's motion. The Association appeals that decision and raises three assignments of error.
{¶ 8} The Association claims that the trial court improperly based its decision to dismiss the complaint upon the decision of the arbitrator. Appellees claim in response that even though the Arbitrator's Decision was outside the four corners of the pleadings, the trial court was allowed to take judicial notice of the Arbitrator's Decision.
{¶ 9} Civ.R. 12(B)(6) provides that a trial court may grant a motion to dismiss a complaint for "failure to state a claim upon which relief can be granted." When ruling on a Civ.R. 12(B)(6) motion to dismiss, the court must presume the truth of all factual allegations in the complaint. Mitchell v. Lawson Milk Co. (1989),
{¶ 10} In considering a Civ.R. 12(B)(6) motion to dismiss, a court is limited to the four corners of the complaint. Thompson v. Central OhioCellular, Inc. (1994),
{¶ 11} Here, the trial court relied upon an Arbitrator's Decision which was attached to the School District's Motion to Dismiss. Appellees' argue this was proper because the trial court may take judicial notice of "appropriate matters" in considering a Civ.R. 12(B)(6) motion to dismiss for failure to state a claim. State ex rel.Neff v. Corrigan (1996),
{¶ 12} However, a trial court cannot take judicial notice of court proceedings in another case. Campbell v. Ohio Adult Parole Auth. (Oct. 28, 1997), 10th Dist. No. 97APE05-616, citing Woodman v. TubbsJones (1995),
{¶ 13} Here, the Arbitrator's Decision stemmed from another case and was therefore inappropriate for the trial court to consider. Even if the trial court was allowed to take judicial notice of the Arbitrator's Decision, it was not allowed to do so when ruling on a 12(B)(6) motion as the Arbitrator's Decision would constitute matters outside of the pleadings. Moreover, because the trial court did not provide notice to the parties, it was not allowed to convert the motion to dismiss into a motion for summary judgment. See Lansing v. Hybud Equip. Co., 5th Dist. No. 2002CA00112,
{¶ 14} Accordingly, this assignment of error is meritorious. However, because this court reviews the granting of a Civ.R. 12(B)(6) motion to dismiss de novo, this court may still uphold the trial court's decision if there was some other appropriate basis for dismissal. As such, the remaining two assignments of error must be addressed to determine whether or not the Civ.R. 12(B)(6) motion was properly granted.
{¶ 16} This assignment of error deals solely with the trial court's dismissal of the School District; it does not deal with the dismissal of claims against the ODE or the State Board. The Association claims that the trial court erred in granting the School District's motion to dismiss. The Association argues that the School District is a necessary party because the Association's complaint challenges the ODE's and the State Board's directions to the School District. Thus, the Association claims the School District has a legal interest in the action.
{¶ 17} The School District counters that dismissal was proper arguing that it was either not a necessary party or that the Association failed to join necessary *6 parties. Essentially, the School District states that if it is a necessary party, so is every other school district in Ohio. In making this argument, the School District points to the allegations in the Association's complaint noting that the Association has failed to assert any wrongdoing on the part of the School District or request any relief with regards to the School District.
{¶ 18} We agree that the Association has failed to state a claim against the School District. Although the School District acted by the reduction in force, it only did so based upon what it was ordered to do by the State Board. The complaint contains no direct claims against the School District. All claims are asserted against the State Board and the ODE, not the School District. Moreover, the School District has no authority to grant any of the relief requested. Thus, this assignment of error is meritless. Thus, the granting of the Civ.R. 12(B)(6) motion for the School District was not in error.
{¶ 20} This assignment of error deals solely with the dismissal of the claims against the State Board and the ODE. For purposes of this assignment of error, the State Board and the ODE are addressed together and are referred to as State Appellees.
{¶ 21} The Association's complaint alleged three claims against the State Appellees: 1) that it exceeded its statutory authority under R.C.
{¶ 22} The first two claims can be addressed together as they both allege that the State Appellees exceeded its authority by requiring the School District to do more than plan to avoid future deficits. The Association specifically claims that Ohio Adm. Code
{¶ 23} Ohio Adm. Code
{¶ 24} "(E) A board of education notified under division (A) of section
{¶ 25} And, the relevant portions of R.C.
{¶ 26} "(A) No later than July 1, 1998, the department of education and the auditor of state shall jointly adopt rules requiring boards of education to submit five-year projections of operational revenues and expenditures. The rules shall provide for the auditor of state or the department to examine the five-year projections and to determine whether any further fiscal analysis is needed to ascertain whether a district has the potential to incur a deficit during the first three years of the five-year period.
{¶ 27} "The auditor of state or the department may conduct any further audits or analyses necessary to assess any district's fiscal condition. If further audits or analyses are conducted by the auditor of state, the auditor of state shall notify the department of the district's fiscal condition, and the department shall immediately notify the district of any potential to incur a deficit in the current fiscal year or of any strong indications that a deficit will be incurred in either of the ensuing two years. If such audits or analyses are conducted by the department, the department shall immediately notify the district and the auditor of state of such potential deficit or strong indications thereof. *8
{¶ 28} "A district notified under this section shall take immediate steps to eliminate any deficit in the current fiscal year and shall begin to plan to avoid the projected future deficits."
{¶ 29} In support of its claim that the State Appellees acted lawfully because the two provisions are not in conflict, it cites toNorthwestern Ohio Bldg. Constr. Trades Council v. Conrad,
{¶ 30} In that case, the Supreme Court was asked to decide whether an agency gave a permissible interpretation of an administrative rule. Concluding that it did, the Supreme Court explained:
{¶ 31} "It is axiomatic that if a statute provides the authority for an administrative agency to perform a specified act, but does not provide the details by which the act should be performed, the agency is to perform the act in a reasonable manner based upon a reasonable construction of the statutory scheme. See Swallow v. Indus. Comm.
(1988),
{{¶ 32} "* * *
{{¶ 33} "Unlike the court of appeals, we do not find the legislative gap equivalent to a lack of authority for the agency to act. As the United States Supreme Court has noted, `[t]he power of an administrative agency to administer a * * * program necessarily requires theformulation of policy and the making of rules to fill any gap left,implicitly or explicitly,' by the legislature. (Emphasis added.)Morton v. Ruiz (1974),
{¶ 34} Here, the State Appellees argue that the rule does not conflict with the statute. Rather, it concludes that the rule merely ensures that districts are fulfilling their duty to plan and provides the State Appellees with a way to accurately assess the condition of a district's finances. It further argues that "[w]here a potential conflict exists between an administrative rule and a statute, an administrative rule is not inconsistent with a statute unless the rule contravenes or is in derogation of some express provision of the statute." In re MansfieldGen. Hosp. (1993),
{¶ 35} Considering all the above law, we agree with the State Appellees; the rule does not conflict with the statute. Requiring the School District to submit a plan is not in direct conflict with the statutory requirement to begin to plan. Rather, we believe that requiring the School District to submit a plan is a way of implementing the requirement that they begin planning.
{¶ 36} Furthermore, as the State Appellees argue, both R.C.
{¶ 37} "(C) Administer and supervise the allocation and distribution of all state and federal funds for public school education under the provisions of law, and may prescribe such systems of accounting as are necessary and proper to this function. It may require county auditors and treasurers, boards of education, educational service center governing boards, treasurers of such boards, teachers, and other school officers and employees, or other public officers or employees, to file with it such reports as it may prescribe relating to such funds, or to the management and condition of such funds." *10
{¶ 38} R.C.
{¶ 39} "(2) The superintendent shall prescribe and require the preparation and filing of such financial and other reports from school districts, officers, and employees as are necessary or proper. The superintendent shall prescribe and require the installation by school districts of such standardized reporting forms and accounting procedures as are essential to the businesslike operations of the public schools of the state."
{¶ 40} Considering all the above, we find that the State Appellees did in fact have the authority to require that the School District submit a plan to eliminate a projected future deficit. Consequently, the Association's claim that the State Board lacked authority to require the submission of a plan fails as a matter of law. Thus, the trial court did not err by dismissing the Association's first two claims; the Association has failed to state a valid claim against the State Appellees.
{¶ 41} Next, we must address the Association's third and final claim that the State Appellees had no statutory authority to advise the School District that it would be placed in fiscal caution if it did not submit a plan. The Association's argument is that the only way a school district can be placed in fiscal caution is if the conditions in R.C.
{¶ 42} R.C.
{¶ 43} There is no allegation here that requirements in R.C.
{¶ 44} R.C.
{¶ 45} The issue of whether the trial court could take judicial notice of the guidelines and base its decision to dismiss the complaint due to failure to state a claim on those guidelines does not need to be addressed. When considering R.C.
{¶ 46} In a nutshell, the above statutes provide that the state superintendent has the authority to make guidelines and may place a district in fiscal watch if it finds that the district's plan submitted pursuant to R.C.
{¶ 47} The statute is clear in its grant of discretion to State Appellees. The State Appellees' indication that if a plan was not submitted the district could be placed in fiscal caution was within the authority granted in R.C.
{¶ 48} For the foregoing reasons, the judgment of the trial court is hereby affirmed. *13 DeGenaro, P.J., concurs and dissents in part; see concurring in part/dissenting in
part opinion. Waite, J., concurs.
Dissenting Opinion
{¶ 49} I concur in the vast majority of the majority's discussion resolving the issues in this case. Nevertheless, I must respectfully dissent from its ultimate conclusion because I disagree with the majority's resolution of the Association's third and final argument within its third assignment of error.
{¶ 50} In the third argument within the Association's third assignment of error, the Association claims that the trial court could not have granted the motion to dismiss because the State Appellees had no statutory authority to advise the School District that it would be placed in fiscal caution if it did not submit a plan. As the Association correctly points out, the state superintendent can declare a district to be in fiscal caution only when (1) a determination has first been made that the school district is engaging in fiscal practices or that budgetary conditions exist that could result in a future declaration of fiscal watch or fiscal emergency; or (2) when conditions set forth in R.C.
{¶ 51} The State Appellees responded by arguing that they had the authority to declare a fiscal caution if a plan was not submitted citing to R.C.
{¶ 52} "(A) The state superintendent of public instruction, in consultation with the auditor of state, shall develop guidelines for identifying fiscal practices and budgetary conditions that, if uncorrected, could result in a future declaration of a fiscal watch or fiscal emergency within a school district."
{¶ 53} The State Appellees then point to these guidelines, which were attached to its motion to dismiss but were not in the scope of the pleadings, as authority to place the School District in fiscal caution. *14
{¶ 54} As the majority concluded in paragraphs 12 and 13 of its opinion, the trial court could not consider matters outside the four corners of the complaint when ruling on the Civ.R. 12(B)(6) motion to dismiss, which leads to the conclusion that we cannot use the guidelines when deciding this issue. The State Appellees recognizes this issue and argues that we can take judicial notice of the guidelines, thereby avoiding the fact that the guidelines are not in the complaint. This is incorrect. If we took the action advocated by the State Appellees, then we would still be considering matters outside the four corners of the complaint. If the trial court chooses to convert a motion to dismiss for failure to state a claim into a motion for summary judgment, then it must provide notice that it has done so to all parties at least fourteen days before the time fixed for hearing. Petrey. Because the trial court did not provide notice to the parties, it was not allowed to convert the motion to dismiss to one for summary judgment and take into account the attached documents.
{¶ 55} The majority concludes that it does not matter whether the trial court was allowed to take judicial notice of the guidelines which detail when a school district can be declared in fiscal watch or emergency because the state superintendent has the complete discretion to promulgate these guidelines. In other words, the majority believes that the state superintendent's discretion to promulgate the guidelines prevents courts from reviewing whether those guidelines have been applied properly. I must respectfully disagree.
{¶ 56} By imbuing the state superintendent with the authority to create these guidelines, the legislature has created a situation akin to the creation of "House Rules" for Monopoly. The person with the authority to create "House Rules" for a game can create whatever rules she wants at the start of the game. However, once the game begins, fairness dictates that those rules must be followed for the duration of the game. This way, the players are put on notice of what is permitted and what is prohibited before they act. Any change in the rules mid-game would be unfair.
{¶ 57} Here, the state superintendent may have been placed in charge of the "House Rules" governing fiscal caution by the legislature and we have no authority to *15 question the rules which he promulgates. However, once the state superintendent promulgates the guidelines, he must be expected to play by the rules which he has set up — and courts are the proper forum to ensure that those rules are being fairly applied.
{¶ 58} This case is not one challenging the guidelines adopted by the state superintendent. Instead, we must consider whether the State Appellees properly applied those rules to the present fact scenario. Thus, the actual guidelines are both relevant and necessary to determine the issues raised in the Association's third argument within this third assignment of error. If the "rules" set out at the beginning of "the game" did not prohibit the behavior of the School District, the superintendent cannot change those rules "mid-game." To do so would deprive schools of both notice and due process.
{¶ 59} In conclusion, I concur with the majority's resolution of the Association's first and second assignments of error. The School District was properly dismissed as a party to this case and this portion of the trial court's decision should be affirmed. However, it is improper to allow the trial court to dismiss the claims against the State Appellees because of the issue outlined above and that portion of the trial court's judgment should be reversed.
{¶ 60} I recognize that this means we would be remanding the matter to the trial court so, for all practical purposes, the parties could simply present this same issue to the trial court in a subsequent motion, like a motion for summary judgment. The trial court would likely make the same ultimate conclusion that it did in this case, that the Association is not entitled to relief. However, it is important to note that this is mere supposition, not certainty. Parties should be given all of the procedural process which they are due, regardless of our suspicions about how the case will ultimately be resolved. *1