On certification to the Superior Court, Appellate Division, whose opinion is reported at 226 N.J. Super. 367 (1988).
For reversal -- Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. For affirmance -- None. The opinion of the Court was delivered by Handler, J.
The question in this case is whether the statute of limitations under the Contractual Liability Act can be invoked to bar an action against the State Department of Transportation by a contractor that, at the invitation of the State, had pursued an administrative disposition of its claim. The trial court ruled that the State should be equitably estopped from asserting its statutory-limitations defense because it participated in the attempted administrative disposition of the contractor's claim. On appeal, the Appellate Division reversed. It rejected the theory of equitable estoppel as well as the argument that the statute of limitations was tolled because the contract was not "complete" until the administrative review of the claim had been concluded.
We thus consider on this appeal whether a public contract remains uncompleted during the pendency of administrative proceedings to determine disputed claims for purposes of the limitations defense under the Contractual Liability Act. We consider also whether the initiation and participation by the State in such administrative proceedings can give rise to an equitable estoppel that bars assertion of the limitations defense. The circumstances of this case, further, implicate the issue of whether principles of contract fairness prevent the State from asserting the limitations defense because the State was impliedly obligated to deal expressly with the effect, if any, of administrative-review proceedings on the availability of the statute of limitations defense in a judicial action.
The plaintiff, W.V. Pangborne & Co. (Pangborne), is a licensed electrical contractor that was awarded a contract on October 6, 1980, by the State Department of Transportation (DOT) for the rehabilitation and re-electrification of the Gladstone Branch of the Erie Lackawanna Line. The parties entered into the contract on November 19, 1980, and Pangborne
began work on February 18, 1981. In the course of this project, in September 1983, Pangborne submitted a request to enlarge its fees to recover the cost of rock excavation, which it claimed was not contemplated in the plans and specifications on which Pangborne's original bid submission was based. Two months later, in November 1983, DOT notified Pangborne by letter that it was rejecting Pangborne's request. However, in that letter, DOT invited Pangborne to submit its claim to the Claims Committee:
I must reaffirm the prior rejection of any consideration for costs for subsurface rock excavation. . . .
If W.V. Pangborne & Co., Inc. wishes to pursue this claim further, they may do so by submitting the claim in accordance with N.J.A.C. 16:33-2-1 through 2-8 (copy attached).
[Letter from Martin Van Riper, Superviser Construction Engineer, DOT, to James Haugh, Project Manager, Pangborne, dated November 17, 1983.]
According to the record, Pangborne's work under the contract was substantially completed by June 1983. After Pangborne completed connective and clean-up work, it left the project site in March 1984. On July 3, 1985, Pangborne filed its claim with DOT's Claims Committee. On July 22, 1985, while the matter was before the Claims Committee, DOT sent Pangborne documentation for final payment. On December 29, 1985, while the claim was still pending before the Claims Committee, DOT accepted Pangborne's qualified release and notified Pangborne that it was making final payment. DOT then informed Pangborne that it was not waiving any rights or defenses to which it was entitled under the relevant statutes:
Since your company has qualified the Standard Release, this office has processed your qualified release for a possible waiver of the Department's right to insist upon an absolute and unconditional release prior to making final payment. . . . By acceptance of this conditional release, the State does not acknowledge the validity of the claims asserted by your company, nor does it waive any requirements or limitations as imposed or the defenses it may have all by virtue of the provisions of N.J.S.A. 59:1-1 et seq. or N.J.S.A. 59:13-1 et seq.
[Letter from Gene Helsel, Dep't of Transp. to R.T. Conley, Sr., President, Pangborne, dated December 20, 1985.]
On January 13, 1986, DOT issued a check pursuant to Pangborne's qualified release, and by January 22, 1986, Pangborne had cashed the check. DOT argues that Pangborne's acceptance of payment at this time started the running of the statute of limitations.
The administrative claims process took about fifteen months. As stated earlier, Pangborne filed its claim in July 1985. The hearing was postponed due to the Claims Committee's revised procedures, relating principally to pagination and copy requirements. The first hearing was finally scheduled for August 20, 1986 (more than one year after the claim was filed). The Committee issued its decision to reject the claim on October 22, 1986, with no reason stated. Pangborne argues the statute of limitations should have begun to run at that time.
Pangborne filed its lawsuit on April 8, 1987. If the one-year statute of limitations had begun to run when Pangborne accepted the State's final payment on January 22, 1986, Pangborne would have been two and one-half months too late. The State's motion for summary judgment was denied by the trial court, which found that circumstances called for equitable estoppel to prevent the State from asserting that the statute of limitations was not tolled until the Claims Review was completed. The Appellate Division in a reported decision, W.V. Pangborne & Co. v. New Jersey Dep't of Transp., 226 N.J. Super. 367 (1988), rejected this argument, as well as the argument that the contract is not "complete" until the Claims Review is concluded. This Court granted the plaintiff's petition for certification. 114 N.J. 301 (1988).
Pangborne asks this Court to interpret the statutory language regarding the "completion of the contract" to imply a requirement that administrative review of pending disputed claims must be determined and completed before the statute of limitations begins to run. The statute reads:
In all contract claims against the State, the claimant shall be forever barred from recovering against the State if:
a. he fails to notify the appropriate contracting agency within 90 days of accrual of his claim except as otherwise provided in section 6 hereof; or
b. he fails to file suit within 2 years of accrual of his claims or within 1 year after completion of the contract giving rise to paid claim, whichever may be later; or
c. the claimant accepts personally or through his agent or legal representative any award, compromise or settlement made by the State of New Jersey.
[N.J.S.A. 59:13-5 (emphasis added).]
DOT's contract with Pangborne incorporates the State's Standard Specifications, which by its own terms provide that the "project" covered by the contract is "complete" when the contractor's work has been "accepted" and final or qualified ...