Court Opinion

ID: 9542354
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:33:27.477087+00
Date Added: 2024-06-11T15:07:47.244020
License: Public Domain

STEIN, J.,
concurring in part and dissenting in part.
I join in the Court’s opinion to the extent that it allows Morris County (County) to recover all underpayments due to it from the *112State from and after January 9, 1992, pursuant to its 1983 agreement with the Department of Corrections (Contract). I disagree with the Court’s summary disposition that precludes the County from recovering underpayments prior to that date because of its alleged failure to comply with the notice and suit filing requirements imposed by the provisions of the Contractual Liability Act. N.J.S.A. 59:13-1 to -10. Fairly read, this record mandates a remand for an evidentiary hearing to permit a trial court to determine whether the State acted in good faith in failing to honor the contract terms for such an extended period, and whether the County, through the exercise of reasonable diligence, could have discovered earlier the fact and the extent of the State’s noncompliance with the Contract’s reimbursement provisions.
I
The controlling legal principles are best articulated in W.V. Pangborne & Co. v. New Jersey Department of Transportation, 116 N.J. 543, 562 A.2d 222 (1989). There, as here, a State agency asserted the claim limitations provision of the Contractual Liability Act (Act) to bar a claim by a contractor that, at the State’s invitation, had pursued an administrative disposition of its claim. The applicable provision of the Act required that suit be instituted within one year after completion of the contract, N.J.S.A 59:13-5b, which we interpreted to mean acceptance by the Department of Transportation (DOT) of the contractor’s work and approval of final payment. Indisputably, suit was not commenced within one year of completion of the contract, and we rejected the contractor’s contention that the work was not “complete” until completion of the administrative review of the contractor’s claim. Id. at 552-53, 562 A.2d 222. We also rejected the contractor’s contention that the State was equitably estopped from asserting the statute of limitations defense. Id. at 554-57, 562 A.2d 222. Nevertheless, we noted that that conclusion “does not relieve the State in these circumstances of the obligation to deal forthrightly and fairly with its contractor.” Id. at 557, 562 A.2d 222. The Court accordingly *113considered whether DOT impliedly was obligated to “withhold a statute of limitations defense while its contractor cooperated in submitting a disputed claim to administrative review that DOT itself encouraged and subsequently controlled.” Id. at 560, 562 A.2d 222.
Concluding that DOT could not be permitted to assert the statute of limitations defense, Justice Handler, writing for a unanimous Court, observed:
We do not think obligations or entitlements under public contracts should become the matter of either cunning or guess-work.
Moreover, we have insisted that in the exercise of statutory responsibilities, government must “turn square comers” rather than exploit litigational or-bargaining advantages that might otherwise be available to private citizens. F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426, 495 A.2d 1313 (1985). “[The government’s] primary obligation is to comport itself with compunction and integrity, and in doing so government may have to forego the freedom of action that private citizens may employ in dealing with one another.” Id. at 427, 495 A.2d 1313. We have similarly insisted that government adhere to strict standards in its contractual dealings. P.T. & L. Constr. Co. v. Department of Transp., 108 N.J. 539, 531 A.2d 1330 (1987); Keyes Martin & Co. v. Director, Div. of Purchase, 99 N.J. 244, 491 A.2d 1236 (1985); L. Pucillo & Sons, Inc. v. Mayor and Council of New Milford, 73 N.J. 349, 375 A.2d 602 (1977). Therefore, DOT’S failure to act with greater clarity regarding the statute of limitations, its successful encouragement of an administrative proceeding that redounded to its advantage in terms of added investigation, complete discovery, fuller preparation in defense of the contractor’s claim, as well as delay in payment, and its subsequent attempt to seek a litigational advantage based on Pangbome’s inadvertence or false impression constituted conduct that seems inconsistent with the notion that government must act fairly and “with compunction and integrity.” F.M.C. Stores, supra, 100 N.J. at 427, 495 A.2d 1313.
[116 N.J. at 560-62, 562 A.2d 222.]
II
Several aspects of this record suggest strongly the appropriateness of an evidentiary hearing to determine whether the State’s assertion of the statute of limitations defense is consistent with the high standards to which governmental agencies are held in their contractual relationships. To begin with, it bears noting that the County Correctional Policy Act of 1982, N.J.S.A. 30:8-16.3 to *114-16.12, pursuant to which the Contract between the County and the Department of Corrections (DOC) was entered into, was adopted to assist the State in addressing a prison overcrowding emergency. See Office of the Governor, Prison Overcrowding: A Plan of Action 13-14 (1982) (Prison Overcrowding). The Governor’s Prison Overcrowding plan verifies that the provision of State financial grants to counties that renovated and improved county correctional facilities and agreed to house State prisoners was part of a comprehensive effort by the executive and legislative branches of state government to confront and resolve a severe overcrowding crisis in State correctional facilities. A reasonable inference in that context is that the State’s offer of a per diem reimbursement rate to counties that was linked to the State’s cost of operating three of its largest prisons was intended as an incentive to counties to participate in the State’s grant program. The record does not inform us of the total number of counties that participated in the State’s grant program. Nevertheless, given that the grant program’s purpose was to assist the State in alleviating its prison overcrowding crisis, there is some irony in the Assistant Attorney General’s concession at oral argument that the Counties of Gloucester, Hudson and Middlesex, in addition to Morris, also have found it necessary to sue the State to collect underpayments in the amount of reimbursement due under their respective contracts.
Moreover, the Court is far too generous to the State in its willingness to impose responsibility on the County for failing to discover the correct rate of reimbursement at an earlier date. The Court states:
The present situation involves a contract with clear and explicit payment provisions. The actual payments due under the contract were readily discoverable through public information and calculation. Not only could the County have discovered the lack of adherence to the contractual reimbursement rate through the exercise of reasonable diligence, but the County probably had actual knowledge that there existed a difference in payment as early as 1989, the time at which the Commissioner stated, that the cost to house a State prisoner in Trenton was $63.
[Ante at 110-11, 707 A.2d at 973.]
*115The Court’s reference to the Commissioner of Correction’s 1989 statement concerning the actual reimbursement rate was based on Commissioner Fauver’s October 28, 1989 testimony under oath in United States District Court Civil Action No. 82-1946 entitled Camden County Jail Inmates v. Parker, that the average cost to house a State prisoner was approximately $68.00 per day. The Court infers that that testimony, assuming it was known to the County, clearly indicated that the State was underpaying the agreed reimbursement rate.
However, this record also reveals that in the course of appellate litigation concerning the adequacy of the State’s reimbursement rate to counties concerning Executive Order prisoners housed in county jails, see County of Gloucester v. State, 256 N.J.Super. 143, 606 A.2d 843 (App.Div.1992), aff'd as mod, 132 N.J. 141, 623 A.2d 763 (1993), Commissioner Fauver wrote to the Appellate Division Presiding Judge on May 31, 1991, and qualified his federal court testimony about the prevailing reimbursement rate:
In the documents that have now been included to supplement the record, I stated that a fair indication of the cost of housing a state prisoner is approximately $63. See transcript in Camden County Jail Inmates v. Parker at 196, lines 6-17. This figure includes the costs for treatment, education and care programs which are provided at the state level which are not, in many instances, being provided at the county level. When adjustments are made for these services, the average cost of housing a state prisoner is approximately $50 per day.
Commissioner Fauver’s letter to the Appellate Division in Gloucester demonstrates that any county’s reliance on the Commissioner’s 1989 federal court testimony would not have resulted in a reliable and incontestable contract reimbursement rate. Moreover, at oral argument before us, counsel for amicus Middlesex County asserted that the State acted in bad faith in refusing to respond to Middlesex County’s requests to ascertain the correct contract reimbursement rate. The Middlesex County correspondence appears in the State’s Appendix to its Petition for Certification and includes a copy of Commissioner Fauver’s letter of July 7, 1992, to the Warden of the Middlesex County jail in which the Commissioner declines to provide information about budgeted daily costs of housing state prisoners, from which the County’s *116reimbursement rate could be calculated, on the ground that that issue is being litigated in the case of Gloucester v. New Jersey. The Commissioner’s letter to Warden Johnson states:
Dear Warden Johnson:
This will respond to your correspondence of April 13, 1992 and June 25, 1992 wherein you have requested both information concerning budgeted daily costs of housing state prisoners at certain facilities, as well as increased per diem payments for state inmates housed in your facility.
The Department of Corrections is unable to comply with either of your requests at this time. The issue is currently under litigation in Gloucester v. New Jersey, et al. and as such I am not able to provide budget figures. Further, there are no legislatively appropriated funds to pay for any increased per diem.
Very truly yours,
William H. Fauver
Commissioner
Two subsequent letters, dated July 27 and October 2, 1992, to Commissioner Fauver from the Middlesex County counsel, noting that the Gloucester litigation concerned Executive Order reimbursement and that the Warden’s letter sought information about the reimbursement rate for contract prisoners, apparently were not answered.
The Court’s unsubstantiated assertion that “the average state housing rates were public information,” ante at 103, 707 A.2d at 969, and the Attorney General’s highly questionable assumption that Morris County could have “calculate[d] amounts it thought it was entitled to under the agreement” by examining the State Budget, are simply unpersuasive. This record contains more than a slight suggestion of obfuscation and non-disclosure, and an inference that the Legislature had not appropriated adequate funds to permit DOC to pay the full contract rate. The very fact that three other counties are claiming that the State also has breached its contract with them — and in the very same manner as alleged by Morris County — should be sufficient to convince the Court that a remand is warranted.
To afford the State the benefit of the statute of limitations provisions of the Contractual Liability Act is, on this record, an undeserved and unjustified windfall. The Court’s disposition may *117allow the State to escape a substantial and incontestible liability to at least four counties of this State who signed contracts in good faith and took for granted that the State would honor its commitments. There can be no question that the State knew the correct contract reimbursement rate. The unanswered question raised by this record is why the State did not make the payments that its contracts mandated.
Ill
I would remand the matter to the Law Division for an evidentiary hearing to determine whether the State’s assertion of the statute of limitations defense is consistent with the principles we articulated in Pangborne, supra, 116 N.J. at 560-63, 562 A.2d 222.
Justice HANDLER joins in this opinion.
For affirmance in part; reversal in part — Chief Justice PORITZ and Justices POLLOCK, O’HERN, GARIBALDI and COLEMAN — 5.
Concur in part; dissent in part — Justices HANDLER and STEIN — 2.