Case Title: Middletown Township Policemen's Benevolent Association Local No. 124 v. Township of Middletown

Citation: 

Docket Number: a-116-98

State: new-jersey

Court: New Jersey Supreme Court

Date: 2000-02-09T00:00:00Z

Document:
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). GARIBALDI, J., writing for a unanimous Court. The issue in this appeal is whether a municipality may be equitably estopped from terminating post retirement health benefits of a former municipal employee where that employee has received and relied on those benefits for a period of years. Plaintiff, Irvin Beaver, was employed by Middletown Township as a police officer from October 11, 1966 until November 1, 1988. Prior to retiring, Beaver discussed with Township officials continuation of free health benefits for himself and his family. Township officials repeatedly assured Beaver that he and his family would receive such benefits upon retirement. These assurances were consistent with the collective bargaining agreement between the PBA, Beaver's collective bargaining representative, and the Township. Beaver received free health benefits for himself and his family for approximately ten years after his retirement. In January 1998, intervenor-respondent, Larry S. Loigman, Esq., filed a complaint demanding review of the Township's health insurance coverage to remove any ineligible employees and retired employees. Loigman cited to N.J.S.A. 40A:10-23, which provides that retired municipal employees are required to pay the cost of coverage for themselves and their dependents. The statute does permit a municipal employer, in its discretion, to assume the cost of such coverage for employees, but only after 25 years or more of creditable service. As a result of Loigman's complaint, the Township sent a letter to Beaver dated March 17, 1998 terminating his benefits. Beaver paid $839 to temporarily continue coverage under COBRA for thirty days. Beaver and the PBA filed a complaint on March 25, 1998, asserting improper termination of post-retirement health benefits by the Township. The trial court dismissed the complaint, determining that Beaver was not entitled to post-retirement health benefits. Simultaneously, the trial court granted summary judgment to Loigman in his action against the Township. Plaintiffs appealed. The Appellate Division granted plaintiff's motion for a stay of the termination of health benefits pending appeal. In an unpublished opinion, the Appellate Division affirmed the trial court's ruling. The Supreme Court granted plaintiffs' petition for certification. HELD: The Township is equitably estopped from terminating Beaver's post-retirement health benefits. 1. The essential principle of estoppel is that one may, by voluntary conduct, be precluded from taking action that would work injustice and wrong to another who with good reason and in good faith relied on that conduct. Equitable estoppel is rarely invoked against a governmental entity, but it may be applied in appropriate circumstances unless the application would prejudice essential governmental functions. (pp. 6-8) 2. Equitable estoppel cannot apply if the governmental action is utterly beyond the jurisdiction of the governmental entity. Such action is ultra vires in the primary sense and void. This is not the case if the governmental action is an irregular exercise of a basic power under the legislative grant. The latter action is ultra vires in the secondary sense and does not preclude the application of estoppel. (pp. 8-9) 3. In 1988, policemen and firemen could qualify for special retirement if they had twenty-five years of actual employment with a public entity. Beaver sought to qualify for special retirement by purchasing credit for four years of service in the Navy (from 1962 to 1966). The collective bargaining agreement between the PBA and the Township did not merely permit but required benefits to be paid for employees who had not completed twenty-five years of service. Thus, there is no question that the agreement and payment of Beaver's benefits was ultra vires. The Court holds, however, that it was ultra vires in the secondary sense as an irregular exercise of a basic power. Support for that conclusion is found in the 1995 amendments to N.J.S.A. 40A:10-23, which gave employers the discretion to grant benefits to retiring employees in Beaver's position. (pp. 9-14) 4. The Court finds that the Township is estopped from terminating Beaver's health benefits. Beaver was repeatedly assured that he would continue to enjoy free medical benefits and, in reliance on those assurances, he retired while still in his early forties with a family to support and two and one-half years shy of twenty-five years of actual service. Although Loigman contends that there is no factual basis to support a finding of reliance, the Township has never denied making such repeated assurances. Further, the Township in good faith granted Beaver his benefits for ten years. The trial court's and Appellate Division's reliance on Wolfersberger v. Borough of Point Pleasant Beach, 305 N.J. Super. 446 (App. Div. 1996), as support for their denial of Beaver's medical expenses is misplaced. That case lacks the critical element of reliance. Wolfersberger applied for benefits and was properly denied them. Unlike Beaver, Wolfersberger never received benefits, and therefore could not allege reliance. (pp. 14-17) Judgment of the Appellate Division is REVERSED. CHIEF JUSTICE PORITZ and JUSTICES O'HERN, STEIN, COLEMAN, LONG and VERNIERO join in JUSTICE GARIBALDI's opinion. MIDDLETOWN TOWNSHIP POLICEMEN'S BENEVOLENT ASSOCIATION LOCAL NO. 124, on behalf of its members, and all persons entitled to the benefits of its Collective Bargaining Agreement with Defendant; and IRVIN BEAVER, on behalf of himself and all other persons similarly situated, Plaintiffs-Appellants, v. TOWNSHIP OF MIDDLETOWN, Defendant, and LARRY S. LOIGMAN, Intervenor-Respondent. Argued January 3, 2000 -- Decided February 9, 2000 On certification to the Superior Court, Appellate Division. David J. DeFillippo argued the cause for appellants (Klatsky & Klatsky, attorneys). Larry S. Loigman argued the cause pro se. [Summer Cottagers' Ass'n of Cape May v. City of Cape May, 19 N.J. 493, 503-04 (1955) (citations omitted).] Equitable estoppel is 'rarely invoked against a governmental entity.' Wood v. Borough of Wildwood Crest, 319 N.J. Super. 650, 656 (App. Div. 1999) (quoting County of Morris v. Fauver, 153 N.J. 80, 104 (1998) (citations omitted)). However, equitable estoppel will be applied in the appropriate circumstances unless the application would 'prejudice essential governmental functions.'" Ibid. (quoting Vogt v. Borough of Belmar, 14 N.J. 195, 205 (1954)). Equitable considerations are relevant in assessing governmental conduct and impose a duty on the court to invoke estoppel when the occasion arises. Ibid. (citing Skulski v. Nolan, 68 N.J. 179, 198 (1975)). In Skulski, the Court concluded that it [was] appropriate for [the Court] to weigh equitable considerations, particularly the reliance factor in determining whether the termination of pensions previously granted by the Hudson County Pension Commission was appropriate. Skulski, supra, 68 N.J. at 198-99. The Court found particularly relevant circumstances where pensioners relied upon the pension award in declining to secure subsequent full-time employment either within or without the county, thereby foreclosing the opportunity to secure alternate pension benefits. Id. at 199. In Skulski, we recognized that before an evaluation of the equitable considerations in applying equitable estoppel may take place, an examination of the nature of the governmental action is required. Id. at 198. If the action by the municipality is considered ultra vires, a court must consider whether the conduct is ultra vires in the primary sense, or ultra vires in the secondary sense: There is a distinction between an act utterly beyond the jurisdiction of a municipal corporation and the irregular exercise of a basic power under the legislative grant in matters not in themselves jurisdictional. The former are ultra vires in the primary sense and void; the latter, ultra vires only in a secondary sense which does not preclude ratification or the application of the doctrine of estoppel in the interest of equity and essential justice. [Ibid. (quoting Summer Cottagers' Ass'n of Cape May, supra, 19 N.J. at 504.] Actions that are ultra vires in the secondary sense will permit the application of estoppel. Ibid; see also Summer Cottagers Ass'n of Cape May, supra, 19 N.J. at 506 (holding that the power of sale was within the municipality's essential jurisdiction even if municipality failed to serve proper public notice as required by statute); Jantausch v. Borough of Verona, 41 N.J. Super. 89, 94-95 (Law Div. 1956), aff'd, 24 N.J. 326 (1957) (holding that good faith granting of building permit was within authority of municipal official even if official erroneously interpreted municipal ordinances); Scardigli v. Borough of Haddonfield Zoning Bd. of Adjustment, 300 N.J. Super. 314, 319-20 (App. Div. 1997) (holding that municipality or any of its agencies may be estopped if the circumstances involve reliance on a good faith act of an administrative official, within the ambit of that official duty, which constitutes an erroneous and debatable interpretation of an ordinance. )). Therefore, to determine whether principles of equitable estoppel should be applied to resolve this appeal, we must consider whether the Township's extension of benefits to Beaver in 1988 was ultra vires, and if so, whether it was ultra vires in the primary or the secondary sense. For the purposes of this section, employer was defined as the State of New Jersey, the county, municipality or political subdivision thereof which pays the particular policeman or fireman, see N.J.S.A. 43:16A-1(6) (1988), and service was defined as service as a policeman or fireman paid for by an employer, see N.J.S.A. 43:16A-1(7) (1988). On June 26, 1995, the Legislature amended N.J.S.A. 40A:10-23 to broaden[] the categories of employees for whom municipalities and counties may choose to assume the entire cost of providing health and hospital benefit coverage after the employee's retirement. Assembly Local Government Committee Statement to Assembly Bill No. 2588 (March 27, 1995). Specifically, the amendment to N.J.S.A. 40A:10-23 deleted the language 25 years or more service with the employer, and replaced it with 25 years or more of service credit in a State or locally administered retirement system and a period of service of up to 25 years with the employer at the time of retirement, such period of service to be determined by the employer and set forth in an ordinance or resolution as appropriate. The legislative history of the amendment confirms that the amendment was intended to include employees who have aggregated sufficient service credits in one or more State or locally administered retirement systems. Id. In 1988, the Police and Firemen's Retirement System permitted eligible retirees to qualify for special retirement with twenty-five years of creditable service. N.J.S.A. 43:16A 11.1 (1988). Creditable service was defined as service rendered for which credit is allowed as provided under section 4See footnote 33 of this act. N.J.S.A. 43:16A-1(8) (1988). Special retirement entitled an employee to pension benefits as described in N.J.S.A. 43:16A-11.1. If an employee had not completed twenty-five years of employment, yet sought special retirement, he or she couldpurchase credits to qualify. At the time of his retirement, Beaver sought to qualify for special retirement. Although Beaver had been employed by the Township for only twenty-two years, to qualify he purchased credit based on his four years of service in the United States Navy (from 1962 to 1966) by paying into an annuity savings fund. Therefore, upon his retirement, Beaver had completed twenty-five years of creditable service, but not twenty-five years of actual service with the Township. As indicated above, the Agreement between the PBA and the Township offered continued health benefits to all employees who have retired. That contract, therefore, did not comply with the terms of N.J.S.A. 40A:10-23, because it permitted (in fact, required) benefits to be paid to employees who had not completed twenty-five years of service, and therefore was ultra vires. Therefore, we must now consider whether the Agreement was ultra vires in the primary or secondary sense. In Wood, supra, 319 N.J. Super. 650, the Appellate Division considered a similar collective bargaining agreement and held that the contract was ultra vires in the secondary sense. In that case, the Borough of Wildwood Crest granted plaintiff post retirement health benefits, but terminated them after three years. Id. at 652-53. The collective bargaining contract in Wood granted continued health benefits upon retirement, yet did not require a specified term of years to be eligible for continued health benefits as required by N.J.S.A. 40A:10-23. Id. at 653-54. The Appellate Division held that the Borough was equitably estopped from terminating the benefits, reasoning the collective bargaining contract was not ultra vires in the primary sense, because it was not utterly beyond the jurisdiction of the Borough to enter into such an agreement with the PBA. Id. at 660-61. At most, the Wood Court considered the Borough's agreement to be ultra vires in the secondary sense since it was an irregular exercise of a basic power. Ibid. According to the Appellate Division, [t]o label the contract as ultra vires in the primary sense and thus void would, constitute . . . a 'gross injustice.' Id. at 661 (quoting Juliano v. Borough of Ocean Gate, 214 N.J. Super. 503, 510 (Law Div. 1986)). We follow the reasoning of Wood and hold that the Township's extension of benefits to Beaver is ultra vires in the secondary sense because the Agreement was merely an irregular exercise of a basic power of the Township. Support for that conclusion is found in the amended version of N.J.S.A. 40A:10-23 that now authorizes municipal employers discretion to grant benefits to retiring employees in Beaver's position. [Ibid.] After Wolfersberger applied for continued health benefits, the Borough refused to pay for his post-retirement health insurance, arguing that for the purpose of its collective bargaining agreement and N.J.S.A. 40A:10-23, service means only actual service. Id. at 449. The Appellate Division upheld the denial of benefits to Wolfersberger concluding that service under N.J.S.A. 40A:10-23 cannot be construed to mean the same as creditable service under N.J.S.A. 43:16A-1, because of the significant differences in the language, purposes, and legislative history of the two statutes. Ibid. The court held that the Borough properly denied Wolfersberger's benefits pursuant to the discretion granted by N.J.S.A. 40A:10-23, which states that [t]he employer may, in its discretion, assume the entire cost of such coverage for employees. Id. at 450-51 (quoting N.J.S.A. 40A:10-23). This case is easily distinguishable from Wolfersberger, because that case lacks the critical element of reliance. Wolfersberger applied for benefits and was properly denied them. Unlike Beaver, Wolfersberger never received benefits, and therefore he could not allege a claim of reliance. Accordingly, the principle of estoppel could not be applied. CHIEF JUSTICE PORITZ and JUSTICES O'HERN, STEIN, COLEMAN, LONG, and VERNIERO join in JUSTICE GARIBAlDI's opinion. NO. A-116 MIDDLETOWN TOWNSHIP POLICEMEN'S BENEVOLENT ASSOCIATION LOCAL NO. 124, on behalf of its members, and all persons entitled to the benefits of its Collective Bargaining Agreement with Defendant; and IRVIN BEAVER, on behalf of himself and all other persons similarly situated, Plaintiffs-Appellants, v. TOWNSHIP OF MIDDLETOWN, Defendant, and LARRY S. LOIGMAN, Intervenor-Respondent. DECIDED February 9, 2000 Chief Justice Poritz