April 3, 2008
JOHN DUBLANICA, MARCELLA GLEIE, AND JOSEPH J. COSTELLO, PLAINTIFFS-RESPONDENTS,
RIDGEFIELD BOARD OF EDUCATION, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Bergen County, Docket No. C-28-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 25, 2008
Before Judges S. L. Reisner and Gilroy.
Defendant Ridgefield Board of Education (Board) appeals from the March 26, 2007, order of the Chancery Division, General Equity Part, which, following a bench trial, entered judgment in favor of plaintiffs John Dublanica, Marcella Gleie, and Joseph J. Costello. The order directed that the Board provide plaintiffs with long-term care insurance, family dental insurance, and family vision insurance, pursuant to the terms of a Collective Bargaining Agreement (Agreement) dated August 18, 1999. The order also entered monetary judgments in favor of plaintiffs, for the cost of insurance premiums paid by plaintiffs for their insurance coverages, following the Board's termination of payment of those premiums. We affirm.
Plaintiff John Dublanica had been employed by the Board for fourteen-and-one-half years and had retired as an assistant principal in December 2001. Marcella Gleie had been employed by the Board for thirty-three years and had retired as a high school principal in September 2002. Joseph Costello had been employed by the Board for forty-one years and had retired as a business administrator in August 1999. Prior to their retirement, Dublanica and Gleie were members of the Association. Although Costello was not a member of the Association, the parties acknowledged that he was to receive the same benefits as had been granted to members of the Association, unless otherwise provided for or excluded by the Agreement.
On August 18, 1999, the Board and the Association entered into the Agreement, retroactive to July 1, 1998, and effective through June 30, 2000. The Agreement provided that the Board would pay the premiums for plaintiffs' long-term care, family vision, and family dental insurance for plaintiffs' natural lives. Specifically, the Agreement provided the following in Article VII - Retirement:
A. Administrators covered by this contract who Retire From The School District will be entitled to have the following benefits continued for the duration of their natural life as long as the benefit being provided is available to be purchased by the Board of Education and as may be limited by law.
1. Health and sick benefits provided for in Article VI A.*fn1
2. Long term health care insurance provided for in Article VI L.
B. . . . .
C. Any benefits payable pursuant to Article VII A shall be subject to any limits provided for by law.
The Agreement, at Article VI, Paragraph A, provided in relevant part that "[f]amily dental plan payments  [and] family optical plan payments will be paid by the Board of Education for all Administrators." Further, the Agreement, at Article VI, Paragraph L, provided that:
Effective August 1, 1999, the Board will pay the insurance premiums in order to purchase long[-]term health care insurance in accordance with the proposal prepared by C & A Insurance Co., dated August 1, 1999 (attached hereto as Schedule B) for each Administrator listed in said proposal.
The Board performed under the terms of the Agreement until November 21, 2005, when it adopted a resolution terminating payment of premiums for long-term healthcare insurance and vision care insurance. The Board adopted a second resolution on January 26, 2006, terminating payment of premiums for dental insurance.
On January 23, 2006, plaintiffs filed their complaint seeking specific performance of the Agreement, as well as damages for premiums paid by them for long-term care, family vision, and dental insurance from the dates when payments of the insurance premiums were terminated by the Board. After the Board filed its answer, the parties cross-moved for summary judgment. On January 30, 2007, Judge Doyne issued a written opinion denying the cross-motions, determining that: 1) the payment of insurance premiums for retirees had been preempted by N.J.S.A. 18A:16-19; 2) an issue of material fact remained concerning whether plaintiffs had elected at retirement, State-paid coverage under State Health Benefits Program (SHBP), because if they had, then the Board cannot pay the insurance premiums pursuant to N.J.S.A. 18A:16-19; 3) N.J.S.A. 52:18-11.2(b), enacted after the effective date of the Agreement, mandates that employees or retirees pay their own cost of long-term care insurance; 4) questions remained regarding the retroactive application of N.J.S.A. 52:18-11.2; and 5) questions remained whether the Board should be equitably estopped from denying the validity of the Agreement based on plaintiffs' assertions that they had forgone seeking higher wages, relying on the Board's promise to pay the insurance premiums after retirement. A confirming order was entered on February 15, 2007.
On March 20, 2007, a bench trial was conducted based on a stipulation of facts, and testimony of plaintiff Gleie and attorney Stanley Turitz, the attorney who represented the Board at the time the Agreement was negotiated and prepared. Turitz testified that Dr. Richard Sabila, the Superintendent of Schools, informed him that he wanted to provide "additional benefits" in the Agreement because of the extraordinary efforts expended by plaintiffs in implementing the "Magnet School Program" (Program).*fn2 Sabila had conducted his own negotiations with the Association, and after reaching an agreement, Sabila instructed Turitz as to what he should include in the Agreement. Turitz testified that, although he expressed concern over the legality of binding future boards of education to the Agreement, Sabila had told him to "[j]ust do it." Accordingly, Turitz drafted the Agreement, pursuant to Sabila's instruction.
Gleie testified that the Program consumed as much time as was otherwise spent running the high school. Although the Program was never referenced in any prior collective bargaining agreements, Gleie stated that it was included in the Agreement because "it required over and above hours and hours of work and responsibility, medical issues, behavioral issues far beyond what a normal high school program would require," and that she never received any compensation for the additional time spent. Prior to the implementation of the Agreement, plaintiffs were not compensated for their additional efforts and time in implementing the Program.
Concerning the salary provisions in the Agreement, Gleie testified that traditionally the administrators' contracts followed the teachers' contracts by way of equivalent terms, benefits, and other provisions. However, in the Agreement, the administrators only received a 2% raise while, for that same term, the teachers received a 4% raise. As to the discrepancy, Gleie stated that the reduction in the salary increment was in exchange for the administrators having received the benefit of long-term care insurance, and that they had relied on the Board's promise of coverage.
When questioned whether she had any conversations with Sibela regarding the Board's payment of insurance premiums after retirement and for the duration of her natural life, Gleie testified that she knew that "the offer of the retirement package came from Dr. Sibela to the [Association's] negotiating president, Mr. Dunn." She knew "that it was going to result in an impact on the raise because it was tied together [and that] . . . [she] was [not] happy because [she] was entering the last three years of [her] . . . pension formula and it was [not] going to add to [her] pension formula." Gleie stated that she confronted Sabila before the Agreement was drafted, verbalizing the negative impact of only receiving a 2% raise instead of the 4% raise that the teachers were receiving, at which time Sabila indicated that plaintiffs would also be receiving long-term care insurance benefits in retirement.
Gleie relied on the information that Sabila had communicated to her.
Gleie had also spoken to Turitz about the Agreement, and Turitz advised her that it was a "very good contract," and he had worked very hard on it so that future boards could not dismantle it. Gleie asked Turitz what the words "as may be limited by law" meant. Turitz's response was that it meant the Agreement was limited by provisions of the law; that it was standard contract language; and that Gleie had nothing to worry about.
At the conclusion of the trial, Judge Doyne entered an order on March 26, 2007, supported by an oral opinion, compelling the Board to pay plaintiffs' future premiums for long-term care, family dental, and family vision insurance for the duration of their natural lives, and awarded plaintiffs monetary damages for insurance coverages from the time when the Board had terminated payments of the insurance premiums.
In deciding the matter, the judge reaffirmed his prior decision that the Agreement was ultra vires because the insurance issues had been preempted by State legislation, and the Agreement violated the statutory scheme. Although the judge found the Agreement ultra vires, he determined it was only ultra vires in the secondary sense, not primary, and therefore, was voidable and subject to estoppel. The judge concluded that it would have been a gross injustice to declare the contract void in the primary sense because plaintiffs had relied on receiving the insurance benefits after retirement.
The [c]court, though, is satisfied that there is sufficient reliance to justify imposition of equitable estoppel. It is not for the [c]court to determine adequacy of consideration, rather whether or not there was reliance and any consideration for execution of the contract. The reliance in this matter is threefold. First and most importantly is the uncontroverted acceptance by the administrators of a two percent raise in light of a four percent raise then received by the [B]orough's teachers. As the raise accepted was utilized to calculate lifetime pension benefits sufficient reliance is demonstrated. Secondarily, the [c]court is also satisfied that the plaintiffs performed the work as required by P-1 over and above that which could reasonably be expected, and that the same represented an extraordinary effort by the plaintiffs in reliance on the "benefit which" contract executed and implemented. And, lastly, third, the plaintiffs have now lost the ability to finance and/or procure long-term care insurance at the lesser rates that then would have been available but for the contract in question.
The [c]court's determination that sufficient reliance has been demonstrated is buttressed by the fact that there is a glaring lack of any bad faith on behalf of the plaintiffs who fully performed their contractual obligations. Further, all that will be required by way of this decision is that the defendants will be compelled to meet the contractual commitments negotiated and freely agreed upon.
On May 4, 2007, Judge Doyne stayed enforcement of the judgment pending appeal.
On appeal, the Board argues:
THE TRIAL COURT ERRED IN FINDING THAT THE AUGUST 18, 1999 AGREEMENT IS ULTRA VIRES IN THE SECONDARY SENSE AND SUBJECT TO EQUITABLE ESTOPPEL.
A. THE AUGUST 18, 1999 AGREEMENT IS ULTRA VIRES IN THE PRIMARY SENSE AND IS THEREFORE VOID AND UNENFORCEABLE.
B. ASSUMING ARGUENDO THAT THE AGREEMENT IS ULTRA VIRES IN THE SEFCONDARY SENSE, THE APPELLANT IS NONETHELESS NOT SUBJECT TO THE DOCTRINE OF EQUITABLE ESTOPPEL.
Reviewing courts "'do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice . . . .'" Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (quoting Fagliarone v. Twp. of No. Bergen, 78 N.J. Super. 154, 155 (App. Div. 1963)). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).
We have considered the Board's arguments in light of the record and applicable law. We are not persuaded by either of them and affirm substantially for the reasons expressed by Judge Doyne in his cogent, written opinion of January 30, 2007, and in his thoughtful, oral opinion of March 26, 2007. R. 2:11-3(e)(1)(A). Nevertheless, we add the following comments.
The Board contends that the trial judge erred in not declaring the Agreement ultra vires in the primary sense, and therefore, void and unenforceable. The Board contends that because "[plaintiffs] elected to receive and do receive State Health Plan benefits, they are not eligible to receive employer-paid coverage by the express terms of [N.J.S.A. 18A:16-19(b)]." Additionally, the Board asserts that N.J.S.A. 52:18-11.2 entitled "Long[-]term care insurance plan for local contracting units," makes it clear that if a retiree chooses such coverage, he or she, not the Board, must pay the entire cost of coverage.
N.J.S.A. 18A:16-13, provides in pertinent part that a local board of education may enter into contracts of group life, accidental death and dismemberment, hospitalization, medical, surgical and major medical expense insurance, as well as contracts to provide drug prescription and "other health care benefits" for employees of the local board. (emphasis added). The same statute authorizes a local board of education to enter into such contracts "to provide drug prescription and other healthcare benefits as may be required to implement a duly executed collective negotiations agreement, or as may be required to implement a determination by a local board of education to provide such benefit or benefits to employees not included in collective negotiation units." Pursuant to N.J.S.A. 18A:16-17, a board is empowered to pay all or part of the premiums for such contracts. Moreover, N.J.S.A. 18A:16-18 provides that the continuance of coverage after retirement shall be at such rates and under such conditions as prescribed in the insurance contracts, subject to N.J.S.A. 18A:16-19.
Although retired employees are generally required to "pay for the entire cost of coverage," N.J.S.A. 18A:16-19(a), a local board "may, in its discretion, assume the entire cost of such coverage." N.J.S.A. 18A:16-19(b). An exception to that discretionary authority, however, is found in N.J.S.A. 18A:16-19(b), which provides that "retired employees . . . who are eligible for and elect at the time of retirement to take State-paid coverage under the State Health Benefits Program . . . shall not be eligible for employer paid coverage under this subsection." (emphasis added). In addition, N.J.S.A. 52:18-11.2 entitled "Long term care insurance plan for local contracting units," effective February 1, 2006, in pertinent part states that "[a]n employee or a retiree of a local contracting unit that has elected to offer the long term insurance plan may choose such insurance coverage and shall pay the entire cost of the long-term care insurance."
Case law instructs us that before reaching a determination as to whether the Board may be equitably estopped from terminating the insurance premium payments, we must first examine "the nature of the governmental action." Middletown Twp. Policemen's Benevolent Ass'n Local No. 124 v. Twp. of Middletown Twp, 162 N.J. 361, 368 (2000). Because "the facts of a particular case may not fit neatly within the ultra vires 'primary or secondary' designations," the court's examination is fact sensitive. Wood v. Borough of Wildwood Crest, 319 N.J. Super. 650, 660 (App. Div. 1999). If the court concludes that the governmental action is ultra vires, the court must then determine "whether the conduct is ultra vires in the primary sense, or ultra vires in the secondary sense." Middletown Twp. Policemen's Benevolent Ass'n., supra, 162 N.J. at 368.
An act is ultra vires in the primary sense when the act is "utterly beyond the jurisdiction" of the governmental entity. Id. at 368. Such acts are void and the doctrine of equitable estoppel will generally not lie against the governmental entity. Id. at 367-68. However, an act is ultra vires in the secondary sense when the act constitutes "the irregular exercise of a basic power under the legislative grant in matters not in themselves jurisdictional." Id. at 368. (quoting Skulski v. Nolan, 68 N.J. 179, 198 (1975)). When an act is ultra vires in the secondary sense, "[e]quitable estoppel may be invoked against [the governmental entity] 'where interest of justice, morality and common fairness clearly dictate that course.'" Id. at 367 (quoting Gruber v. Mayor and Twp. Comm. of Twp. of Raritan, 39 N.J. 1, 13 (1962)).
Here, the Board participates in the SHBP, and Judge Doyne determined that plaintiffs had elected to and are receiving benefits under that plan. The coverages are included in the term "employer paid coverage," and because plaintiffs elected to receive those benefits, they are not eligible for such coverages by the express terms of N.J.S.A. 18A:16-19(b). Accordingly, we conclude that Judge Doyne correctly determined that the Agreement to provide lifetime insurance coverage is ultra vires.
We also agree with Judge Doyne that the Agreement is ultra vires in the secondary sense, not the primary sense. Entering into the Agreement to provide lifetime healthcare benefits was not "utterly beyond the jurisdiction" of the Board. N.J.S.A. 18A:16-13 grants authority to local boards of education to enter into contracts to provide healthcare benefits "as may be required to implement the duly executed collective negotiations agreement." Because the insurance coverages are required to fulfill the terms of the Agreement, the Board's action is not ultra vires in the primary sense. Rather, by providing insurance coverages for the remainder of plaintiffs' natural lives, the Board engaged in "an irregular exercise" of its powers and, thus, may be subject to estoppel." Id. at 367-69; Williams Scotsman, Inc. v. Garfield Board of Educ., 379 N.J. Super. 51, 59 (App. Div. 2005), certif. denied, 186 N.J. 241 (2006).
Moreover, as noted by Judge Doyne, to label the Agreement as ultra vires in the primary sense would constitute a "gross injustice," Middletown Twp. Policemen's Benevolent Ass'n, supra, 162 N.J. at 371 (quoting Wood, supra, 319 N.J. Super. at 661), particularly when there has been no suggestion that bad faith or fraud was in play in the grant of the subject benefits to plaintiffs.
The Board argues next that even if the judge was correct in determining the Agreement was ultra vires in the secondary sense, thereby voidable and subject to estoppel, that the judge erred in determining that the Board was estopped from voiding the Agreement. We disagree.
Although the doctrine of equitable estoppel is "'rarely invoked against a governmental entity,'" Wood, supra, 319 N.J. Super. at 656 (quoting County of Morris v. Fauver, 153 N.J. 80, 104 (1998)), the doctrine "may be invoked against a municipality 'where the interests of justice, morality and common fairness clearly dictate that course.'" Middletown Twp. Policemen's Benevolent Ass'n, supra, 162 N.J. at 367 (quoting Gruber, supra, 39 N.J. at 13). The Court in Middletown stated that "'[t]he rights of persons innocently entering into municipal contracts have to be considered in order to avoid manifest injustice and legal wrong." Id. at 372 (quoting Wood, supra, 319 N.J. Super. at 657).
Moreover, the Court has held that courts should examine equitable considerations when assessing governmental conduct and that the "reliance factor," in particular, should be taken into account. Skulski, supra, 68 N.J. at 198-99; see also Hill v. Bd. of Adjustment of Eatontown, 122 N.J. Super. 156, 162 (App. Div. 1972) (finding that "if a permit was 'irregularly' issued, but in good faith and within the ambit of the building inspector's duty, it is not 'utterly void' and estoppel is permissible with proper good faith reliance thereon").
Here, there was sufficient reliance to invoke the principle of equitable estoppel to prohibit the Board from terminating the post-retirement health benefits. Middletown Policemen's Benevolent Ass'n, supra, 162 N.J. at 371. Judge Doyne found the reliance in this matter was threefold: 1) plaintiffs accepted a 2% annual increase in salary, rather than the 4% increase awarded to the teachers, resulting in a reduction of pension benefits; 2) plaintiffs performed extra work in implementing the Program; and 3) plaintiffs lost the ability to obtain long-term care insurance at lower rates that were previously available when the Agreement was negotiated. We agree. "A [governmental entity] will be equitably estopped from terminating benefits that were previously approved and relied upon by the recipient." Id. at 372. Accordingly, based on the particular facts of this appeal, we affirm.