On appeal from Superior Court of New Jersey, Law Division, Mercer County, L-488-06.
The opinion of the court was delivered by: Reisner, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 25, 2008
Before Judges Parrillo, S.L. Reisner and Gilroy.
Plaintiff New Jersey Division of Taxation (Division) appeals from a November 17, 2006 trial court order, dismissing its complaint against defendant Selective Insurance Company of America (Selective) because the complaint was filed beyond the ten-year statute of limitations generally applicable to claims filed by the State, N.J.S.A. 2A:14-1.2a.*fn1 Selective has cross-appealed, contending that the trial court should have applied the two-year statute of limitations for motor fuels tax bonds, N.J.S.A. 54:39-20.*fn2
We hold that the ten-year statute of limitations applies, because the tax obligor's seller/user license was neither revoked nor canceled within the meaning of N.J.S.A. 54:39-20.
We reject the Division's contention that the statute of limitations is triggered by the surety's refusal to pay on the bond, and hold instead that the limitations period began to run when the taxpayer's tax obligations came due. Because some of those obligations may have come due within the ten-year time period, we affirm in part and remand in part.
This case arises from the failure by the operator of a motor fuels service station to pay taxes. The operator, A&T Paramus t/a International Motor Plaza (A&T), applied for a seller/user license required for a seller of special fuels such as kerosene and diesel. See N.J.S.A. 54:39-64.1; N.J.A.C. 18:18-5.1. As a condition of obtaining the license, A&T was required to obtain a motor fuels tax bond, which it obtained from Selective in the amount of $200,000.*fn3 The bonding statute, N.J.S.A. 54:39-64.2, provides:
A seller of special fuels and user of special fuels, may, at the discretion of the director . . . be required to file a bond with the director in an amount not greater than three times the tax on the greatest amount of motor fuels handled during any one month of the previous 12 months . . . . Such bond shall . . . be executed by a surety company duly licensed to do business under the laws of the State of New Jersey, and be conditioned upon the prompt filing of true reports and the payment by the licensee to the director of all motor fuels taxes which are now or which hereafter may be levied or imposed by the State of New Jersey.
By its terms, the bond covered the period from August 2, 1994, to the date A&T's license was suspended or revoked for cause "or otherwise cancelled" or the surety was "properly released and discharged as to future liability." A&T failed to pay the motor fuels taxes it owed for the period March 1994 to May 1996.*fn4 The Division filed certificates of debt, having the effect of judgments against A&T, in 1995 and 1996. See N.J.S.A. 54:49-12.*fn5 A&T filed for bankruptcy on June 4, 1996. Selective canceled the surety bond effective August 2, 1996. A&T's license, which had been renewed for a three-year period in April 1995, lapsed at the end of March 1998.
The Division first attempted to invoke its rights under the surety bond through a June 20, 1995 letter to Selective requesting payment of A&T's delinquent taxes. This was followed by correspondence in June of 1996. The next communication was not until February 17, 2000, when the Attorney General's Office wrote Selective's agent a letter threatening action to collect on the bond. In a letter dated March 30, 2000, Selective's attorney asserted that the bond was not an asset of A&T's bankruptcy estate and indicated that Selective refused to pay on the bond as long as the taxpayer had funds to pay the debt.
Following some additional correspondence, there was a five-year hiatus until October 25, 2005, when the Attorney General's Office once again sent Selective a letter demanding payment on the bond and threatening litigation. The A&T bankruptcy was terminated by a final order on January 12, 2006. The Division filed its complaint on the bond on February 21, 2006.
In response, Selective filed a motion for summary judgment. Both sides agreed that there were no material facts in dispute. Selective asserted that the State's claim arose at the latest on June 20, 1995, when it sent Selective a letter demanding payment on the bond. Counsel asserted, "It's not insurance, there's no tolling where we have to actually refuse to pay and then there would be an accrual from that point forward." The Division argued that its claim did not accrue until Selective repudiated its claim. The Division also ...