Carroll Salley v. Association for the Development of Academic Excellence, D/B/A Girls and Boys Preparatory Academy

Opinion

Opinion issued July 26, 2012.

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-11-00947-CV ——————————— CARROLL SALLEY, Appellant V. ASSOCIATION FOR THE DEVELOPMENT OF ACADEMIC EXCELLENCE, D/B/A/ GIRLS AND BOYS PREPARATORY ACADEMY, Appellee

On Appeal from the 151st District Court Harris County, Texas Trial Court Case No. 0913508

MEMORANDUM OPINION

This case arises from a dispute over the membership of a board of directors

of a not-for-profit corporation that operates a state-chartered, open-enrollment

school. Carroll Salley appeals from the trial court’s summary judgment in favor of the Association for the Development of Academic Excellence d/b/a Girls and Boys

Preparatory Academy. Salley contends that the trial court erred in granting

summary judgment because (1) the legal status of the board and the eligibility of

board members is governed by the Texas Non-Profit Corporation Act (TNPCA),

not the Texas Education Code, (2) the trial court lacked the authority to “remove”

putative board members—Salley and three of her relatives—under the Texas

Administrative Code for violations of the nepotism provision, and

(3) quasi-estoppel does not bar her claim for declaratory relief. We affirm the

judgment as modified.

Background

In 1995, Salley incorporated the Association for the Development of

Academic Excellence (the ADAE) as a Texas non-profit corporation. In 1996, the

ADAE applied for and was granted a charter, under Chapter 12 of the Texas

Education Code, to establish an open-enrollment charter school in Harris County

called The Girls and Boys Preparatory Academy (Girls and Boys Prep). See TEX.

EDUC. CODE ANN. § 12.101(a)(3) (West 2006) (authorizing State to grant charters

to non-profit corporations). The school opened its doors later that year, and Salley

served as its first superintendent. She continued to serve as superintendent until

2006, when she retired.

2 The Education Code recognizes that charter schools may be governed by the

governing body of the charter holder, if that body acts as the governing body of the

open-enrollment charter school. TEX. EDUC. CODE ANN. § 12.1012(3) (West Supp.

2011) (defining “governing body” of open-enrollment charter school). A charter

school may also be governed by its own board of directors—an entity separate

from the governing body of the charter holder. Id. Although the ADAE wrote a

letter to the State Board of Education seeking to establish a separate board to

conduct Girls and Boys Prep’s affairs, the record does not reveal that the ADAE

ever established such a board.

The Girls and Boys School is governed by the board of directors of its

charter holder, the ADAE. After Girls and Boys Prep opened, the ADAE amended

its by-laws to provide that the ADAE would conduct operations under the name

The Girls and Boys Preparatory Academy.1 The ADAE’s by-laws specifically

provide that the ADAE’s board of directors governs Girls and Boys Prep’s affairs.

The ADAE’s by-laws provide that the board of directors shall consist of a

minimum of three members. Each board member serves a term of three years,

with one-third of the board standing for election each year. A director is elected by

“a majority of the members then serving on the board of directors.” The by-laws

1 The ADAE also filed an assumed name certificate with the Secretary of State, which provides that the ADAE operates under the name The Girls and Boys Preparatory Academy. 3 allow for a director’s removal for cause and after notice and hearing by the

affirmative vote of two-thirds of the board.

Salley testified the first board of directors consisted of herself, Alfonso

Salley (her husband), Kimya Deramus-McKinney (her daughter), Sarah Wallace

(an aunt), and Aisha Al-Hamid. No document records the voting or election of the

ADAE’s board of directors; the ADAE did not preserve any meeting minutes. It is

Salley’s contention that this board (the Salley board)—with the exclusion of Al-

Hamid—is the duly constituted ADAE board, and that it has never been replaced.

Aisha Al-Hamid has since left the United States. The parties do not dispute the

fact that she is no longer on the board of directors of the ADAE. According to

Salley, the board consists solely of the aforementioned members; no other directors

participate on the board.

In contrast, the annual governance forms on file with the State Board of

Education list the following persons as members of the ADAE’s board of directors

for the corresponding years:

 2000-2001: Azelia Badruddin, Ru’Than Gyamfi, Earl Harbin, Gideon Obadan, Carroll Salley  2001-2002: Gideon Obadan, Earl Harbin  2003-2004: Carroll Salley, Gideon Obadan, Ruth Ann Gyamfi  2004-2005: Gideon Obadan, Ruth Ann Gyamfi, Earl Harbin, Cassandra Madison  2005-2006: Gideon Obadan, Ruth Gyamfi, Rodwan Saleh, Dr. Jean Morecny, Cassandra Madison-Ali  2006-2007: Jean Morency, Cassandra Ali, Gideon Obadan

4  2007-2008: Gideon Obadan, Cassandra Ali, Jean Morency  2008-2009: Gideon Obadan, Cassandra Madison, Dr. Jean Morency

Salley signed six of the governance forms—2000, 2001, 2003, 2004, 2005, and

2007—in her role as superintendent or CEO of Girls and Boys Prep.

In 2009, the ADAE sued Salley for trespass, claiming that she had attempted

to interfere with board meetings and disrupted the daily operations of Girls and

Boys Prep. Salley generally denied the claims and counterclaimed for fraud. She

also contended that the ADAE’s suit against her was frivolous, because she and

various family members were members of the ADAE’s board of directors.

In response, the ADAE amended its pleadings to include claims under the

Uniform Declaratory Judgment Act (UDJA). The ADAE sought a declaratory

judgment that (1) its board of directors consisted of Gideon Obodan, Dr. Jean

Morency and Hythia Harris, (2) this board, the Obodan board, was the only board

authorized to act on the ADAE’s behalf, and, as a result, (3) the Salley board—

Salley, Helen Wallace (an aunt), Kimya McKinney-Deramus (her daughter), and

Alfonso Salley (her husband)—did not have authority to operate as the ADAE’s

board of directors. The ADAE also sought injunctive relief preventing Salley and

her family members from contacting the ADAE during business hours, entering the

school campus, and participating in ADAE board meetings, except as citizens

subject to the board’s rules governing citizen participation at meetings.

5 Salley counterclaimed for a declaratory judgment that the ADAE’s board of

directors consisted of herself, Helen Wallace (an aunt), Kimya

McKinney-Deramus (her daughter), and Alfonso Salley (her husband). The

ADAE denied Salley’s counterclaims and pleaded the affirmative defense of quasi-

estoppel.

In July 2010, the ADAE moved for partial summary judgment on the basis

that Alfonso Salley was disqualified from serving on the board of ADAE as a

matter of law, because he had previously been convicted of the felony offense of

burglary. See TEX. EDUC. CODE ANN. § 12.120(a)(1) (West 2006) (disqualifying

felons from serving on charter school board of directors). The trial court granted

the motion and entered judgment that Alfonso Salley was not a member of the

ADAE’s board of directors. Alfonso Salley does not challenge this ruling on

appeal.

In December 2010, the ADAE filed a second motion for partial summary

judgment, asserting both traditional and no-evidence grounds. As traditional

grounds, the ADAE contended that it had established its entitlement to a

declaratory judgment and injunction, prohibiting the Salley board from operating

as board of the ADAE, because undisputed evidence demonstrated that Salley

sought to perpetuate a board composed entirely of family members within three

degrees of consanguinity or within a prohibited degree of affinity, in violation of

6 the Texas Education Code as administered pursuant to Title 19 of the Texas

Administrative Code. In support of its traditional summary judgment motion, the

ADAE included copies of the ADAE’s filings before the State Board of Education,

excerpts of deposition testimony, Salley’s application to Teacher Retirement

Services, and Salley’s employment contract. The ADAE’s no evidence summary

judgment motion contended that Salley had no evidence in support of her claim for

attorney’s fees. The motion also claimed that Salley had no evidence in support of

each element of her claims under Chapter 12 of the Civil Practice and Remedies

Code, which prohibits fraudulent filings before a court. Salley does not challenge

any of the no-evidence summary judgment grounds on appeal.

In reply, Salley maintained that a fact issue existed as to whether Salley filed

the alleged documents before the State Board of Education and whether the

documents contained clerical errors. Salley also contended that the Education

Code did not apply to prohibit her from perpetuating a board of directors, any

quorum of which consists entirely of family members within three degrees of

consanguinity.

The trial court granted summary judgment in favor of the ADAE. After the

trial court rendered partial summary judgment, Salley moved for reconsideration of

the trial court’s interlocutory order. In her motion for reconsideration, Salley again

claimed that the Education Code did not prohibit her from serving on the ADAE’s

7 board of directors, as she contended it was constituted, along with three family

members. And Salley contended that the trial court erred in removing her from her

position on the board. In reply, the ADAE denied that the trial court had removed

Salley from the ADAE board of directors and maintained that the board Salley

sought to perpetuate—a board composed entirely of family members—could not

conduct the affairs of the ADAE because any quorum of her board consisted of

relatives within a prohibited degree of consanguinity.

Upon reconsideration, the trial court vacated its earlier summary judgment

order and entered a new partial summary judgment order in favor of the ADAE.

Its summary judgment order concluded that the Education Code governed the

ADAE’s corporate governance structure, that Salley, Alfonso “Latif” Salley,

Kimya Deramus-McKinney, and Sarah Wallace are related within a prohibited

degree of consanguinity or affinity such that they may not constitute a quorum of

the governing body of the school under the Education Code and the Administrative

Code, and that the ADAE established each element of its quasi-estoppel defense to

Salley’s counterclaim for declaratory judgment. The trial court’s summary

judgment order “removed [the members of the Salley board] from any position

they hold or have held as members of the board of directors of the ADAE.” And

the trial court enjoined Salley, Alfonso “Latif” Salley, Kimya Deramus-McKinney,

and Sarah Wallace from contacting the ADAE or Girls and Boys Prep during

8 business hours, entering the school campus without prior notice, and participating

in board meetings beyond any involvement as a private citizen. Salley does not

appeal the injunctive relief ordered, but only that part of the summary judgment

entering declaratory judgment in favor of the ADAE.

The ADAE’s third and final motion for partial summary judgment addressed

a late filed counterclaim in which Salley sought an injunction and a declaratory

judgment that the Obadan board was not the ADAE’s board of directors. The

ADAE moved for summary judgment on the same grounds on which it previously

secured summary judgment rulings. The ADAE claimed that years of governance

filings and Salley’s application to Teacher Retirement Services estopped her from

challenging the legitimacy of the Obadan board. The trial court granted summary

judgment in favor of the ADAE. The ADAE non-suited its remaining trespass

claims, finalizing the trial court’s interlocutory summary judgment orders.

Discussion

Open-enrollment charter schools operate by state charter. See TEX. EDUC.

CODE ANN. § 12.112 (West 2006) (charter shall be in form of contract). A charter

may be modified, placed on probation, revoked or denied renewal if the charter

holder fails to comply with Chapter 12 of the Education Code. Id. § 12.115. The

charter granted to the ADAE provides that it may be revoked for failure to comply

with an applicable law.

9 In 1999, the legislature amended the Education Code to require

open-enrollment charter schools to file annual governance reports with the State

Board of Education. See TEX. EDUC. CODE ANN. § 12.119 (West Supp. 2011)

(requiring annual reports). Section 12.119 provides that the reports shall contain

“(1) the name, address, and telephone number of each officer and member of the

governing body of the open-enrollment charter school; and (2) the amount of

annual compensation the open-enrollment charter school pays to each officer and

member of the governing body.” Id.

1. Standard of Review

We review de novo the trial court’s ruling on a motion for summary

judgment. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d

844, 848 (Tex. 2009). Under the traditional standard for summary judgment, the

movant has the burden to show that no genuine issue of material fact exists and

that the trial court should grant a judgment as a matter of law. TEX. R. CIV. P.

166a(c); KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d

746, 748 (Tex. 1999). When reviewing a summary judgment, we take as true all

evidence favorable to the nonmovant and indulge every reasonable inference and

resolve any doubts in the nonmovant’s favor. Valence Operating Co. v.

Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Provident Life & Accid. Ins. Co. v.

Knott, 128 S.W.3d 211, 215 (Tex. 2003).

10 Traditional summary judgment is proper only if the movant establishes that

there is no genuine issue of material fact and that the movant is entitled to

judgment as a matter of law. TEX. R. CIV. P. 166a(c). The motion must state the

specific grounds relied upon for summary judgment. Id. A defendant moving for

traditional summary judgment must conclusively negate at least one essential

element of each of the plaintiff’s causes of action or conclusively establish each

element of an affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d

910, 911 (Tex. 1997).

2. Texas Education Code and Board Nepotism

Salley maintains that the trial court erred in granting a summary judgment

declaring that Salley, her husband, her daughter, and an aunt were prohibited from

acting as a quorum of the ADAE’s board of directors. She contends that the trial

court should have applied the Texas Non-Profit Corporation Act (TNPCA) instead

of the Education Code to determine whether the Salley board was authorized to act

as a quorum on behalf of the ADAE. Alternatively, Salley claims that an

exception to the statutory prohibition against nepotism applies in this case. See

TEX. EDUC. CODE ANN. § 12.1055(b) (West Supp. 2011); see also 19 TEX. ADMIN.

CODE § 100.1111(b),(e) (West 2012).

The ADAE is a not-for-profit corporation organized under Texas law and

qualifying under section 501(c)(3) of the Internal Revenue Code. See 26 U.S.C.

11 § 501(c)(3) (2006). The TNCPA does not contain a prohibition against family

members serving on a non-profit’s board of directors. Nevertheless, the governing

structure of the ADAE is subject to other applicable laws governing its formation

and internal affairs.

In this case, the ADAE holds the charter to an open-enrollment charter

school under Chapter 12 of the Education Code and serves as the school’s

governing board of directors. See TEX. EDUC. CODE ANN. § 12.101(a) (authorizing

non-profit corporations to operate open-enrollment charter schools). In accepting a

state charter to operate Girls and Boys Prep, the ADAE agreed to be governed by

the Texas Education Code in addition to the TNPCA, because “open-enrollment

charter schools . . . are subject to the ‘specifically provided’ provisions of and rules

adopted under the Education Code.” LTTS Charter Sch., Inc. v. C2 Constr., Inc.,

342 S.W.3d 73, 77–78 (Tex. 2011); see TEX. EDUC. CODE ANN. §§ 12.103(a),

12.105 (West 2006). The ADAE is therefore subject to the restrictions set forth in

the Texas Education Code, and its board of directors has no authority to operate

Girls and Boys Prep outside of the educational mandate contained in the governing

statutory framework, its articles of incorporation, and its charter. See LTTS

Charter Sch., Inc., 342 S.W.3d at 80.

The Education and Administrative Codes contain statutory prohibitions

against nepotism. TEX. EDUC. CODE ANN. § 12.1055; 19 TEX. ADMIN. CODE

12 § 100.1111(f). Section 12.1055 of the Education Code provides that “[a]n

open-enrollment charter school is subject to a prohibition, restriction, or

requirement, as applicable, imposed by state law or by a rule adopted under state

law, relating to nepotism under Chapter 573 [of the Government Code].” TEX.

EDUC. CODE ANN. § 12.1055(a). Some schools qualify for exemptions from

certain prohibitions against nepotism, but notwithstanding any applicable

exemption, “persons defined under Section 573.021-573.025, Government Code,

shall not constitute a quorum of the governing body or any committee of the

governing body.” Id. § 12.1055(b). The administrative regulations enabling

enforcement of section 12.1055 declare that, “[n]otwithstanding any other

provision of this section, persons related to one another within the third degree by

consanguinity or within the second degree by affinity, as determined under

§ 100.1113 of this title (relating to Relationships by Consanguinity or by Affinity),

shall not constitute a quorum of the governing body or any committee of the

governing body of the charter holder or charter school.” 19 TEX. ADMIN. CODE

§ 100.1111(f).

Any possible quorum of Salley’s proposed board of directors indisputably

consists of persons within the prohibited degree of consanguinity or

affinity, because the board members are Salley, her husband, her daughter, and an

aunt. See TEX. GOV’T CODE ANN. § 573.021–.025 (West 2004); see also 19 TEX.

13 ADMIN. CODE § 100.1111(f). Accordingly, we hold that the trial court properly

applied the nepotism prohibition in rendering summary judgment in favor of the

ADAE on its request for declaratory judgment relief, declaring that Salley, her

husband, her daughter, and an aunt are not authorized to act as a quorum of the

ADAE’s board of directors.

Salley responds that an exception to the prohibition against nepotism applies

in this case, which operates to place the Salley board in control of the ADAE. She

relies on section 100.1111(b), which provides that “[i]f each charter school . . . has

received a satisfactory rating . . . for at least two of the preceding three school

years, then that charter holder may comply with subsection (e) of this section in

lieu of complying with § 100.1111-100.1116 of this division.” 19 TEX. ADMIN.

CODE § 100.1111(b). Salley contends that, because Girls and Boys Prep received

a satisfactory rating for two of the preceding three school years, she is not bound

by the prohibition against nepotism contained in subsection (f). We disagree.

Section 100.1111(f) plainly provides that subsection (f) applies notwithstanding

any other provision of section 100.1111. Id. § 100.1111(f). Subsection (b)’s

exception for exemplary performance thus has no effect on subsection (f)’s

application here.

14 3. Enforcement of Prohibition Against Nepotism

Citing the Administrative Code, Salley maintains that the trial court had no

authority to remove members of the board. See 19 TEX. ADMIN. CODE § 100.1116.

Alternatively, Salley contends that the trial court lacked authority to remove her

and her family members from the ADAE’s board of directors.

Salley relies on section 100.1116 of the Administrative Code to contend that

the trial court lacked authority to remove her from the board. But section 100.1116

does not apply in this case. See id. § 100.1116. Salley and her family members

may not serve as the ADAE’s duly constituted board of directors because any

quorum of the Salley board consists of family members within a prohibited degree

of consanguinity or affinity. See id. § 100.1111(f). Section 100.1116 does not

apply to violations under section 100.1111(f) of the Code. Id. § 100.1116 (“An

individual who violates § 100.1114 . . . or § 100.1115(c) of this title . . . shall be

removed from the individual’s position by the charter holder.”).

Salley seeks to perpetuate a board of directors, any quorum of which is

statutorily prohibited; the trial court’s order remedies the violation of the Code’s

provisions against nepotism. To the extent that Salley contends that she or her

family members are part of the ADAE board, the Code does not preclude

membership where a quorum of the board is not composed of relatives. The trial

court, however, enjoined Salley and her family from participating on the ADAE

15 board of directors. Salley does not appeal that injunction. The declaration

removing Salley from the ADAE board is cumulative of the injunctive relief from

which Salley does not appeal. We affirm the injunction granting such relief as it

was not challenged on appeal. See Britton v. Tex. Dep’t of Crim. Justice, 95

S.W.3d 676, 681 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (requiring

appellant to attack all independent bases or grounds supporting challenged

judgment). Because the language removing Salley from the board is superfluous,

we modify the trial court’s judgment accordingly.

4. Quasi-estoppel

The ADAE also moved for traditional summary judgment on the affirmative

defense of quasi-estoppel. The ADAE maintained that Salley was estopped from

seeking a declaration that the board consisted of her and her family members,

because Salley had filed governance reports before the State Board of Education

indicating that she was not a board member and had represented that she was not a

board member when she claimed retirement benefits. Salley claims that the trial

court erred in granting summary judgment on this basis, because the ADAE did not

carry its summary judgment burden to conclusively establish each element of

quasi-estoppel.

“Quasi-estoppel precludes a party from asserting, to another’s

disadvantage, a right inconsistent with a position previously taken.” Lopez v.

16 Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 864 (Tex. 2000). “The doctrine

applies when it would be unconscionable to allow a person to maintain a position

inconsistent with one to which he acquiesced, or from which he accepted a

benefit.” Id.

We need not reach whether the ADAE met its burden to prove the defense of

quasi-estoppel in this case, because the trial court’s order precludes the Salley

board from forming the governing body of the ADAE as a matter of law. The

declaratory judgment provides that Salley, her husband, her daughter, and an aunt

may not serve together as the board of directors because any possible quorum is

statutorily prohibited. This is the very board that Salley seeks to institute or

perpetuate. And Salley has not appealed the trial court’s injunction prohibiting her

board members from attempting to participate as members of the ADAE board of

directors. Because the Education Code prohibits the Salley board as she contends

it is constituted, we need not consider the application of quasi-estoppel to Salley’s

counterclaim for a declaratory judgment.

17 Conclusion

We conclude that the trial court did not err in applying the Education Code’s

prohibition against nepotism to restrict Salley and her family members from

serving as the ADAE’s board of directors, because any quorum of her board is

related within a prohibited degree of consanguinity or affinity. We delete the

declaration removing the Salley board members from their positions on the ADAE

board, but affirm the injunction granting such relief as it was not challenged on

appeal. As modified, we affirm the summary judgment of the trial court.

Jane Bland Justice

Panel consists of Justices Bland, Massengale and Brown.