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Carlton Hotel Associates, Inc. and the Berger Organization, LLC v. City of Newark


September 25, 2012


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-1286-09.

Per curiam.


Submitted September 10, 2012 -

Before Judges Fasciale and Maven.

Plaintiffs Carlton Hotel Associates, Inc. and The Berger Organization, LLC (plaintiffs) appeal from a July 22, 2011 order granting summary judgment to defendant City of Newark and dismissing plaintiffs' breach of contract complaint. We conclude that no contract existed and affirm.

In reviewing a grant of summary judgment, we apply the same standard under Rule 4:46-2(c) that governs the trial court. See Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007). We must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Viewed most favorably to plaintiffs, the summary judgment record established the following facts.

Defendant, through its Department of Health and Human Services,*fn1 administered an Emergency Assistance Program (EA Program) pursuant to the Work First New Jersey General Public Assistance Act (the Act), N.J.S.A. 44:8-107 to -145.5, and its attendant regulations, N.J.A.C. 10:90-1.1 to -20.13. The EA Program provided eligible recipients with temporary or emergency housing in state-authorized shelters and hotels. Under the Act, the State of New Jersey authorized plaintiffs to provide shelter services. Plaintiffs provided temporary or emergency housing to welfare recipients from 1989 to June 30, 2008.

Generally, a recipient appeared at defendant's welfare office, a caseworker conducted an interview, and then the caseworker provided the recipient with a voucher for a shelter or hotel. If a recipient visited the shelter or hotel first, then the shelter or hotel provided the individual with a referral to defendant's welfare office to begin placement. A voucher typically identified the recipient, service period, and the dollar amount that the shelter or hotel would receive. Plaintiffs would then bill defendant monthly, based on rental rates that derive from N.J.A.C. 10:90-6.7.

The State's General Assistance Automated System (System) provided for an electronic process that required defendant to maintain a zero-balance account. The State electronically funded the account with the exact amount necessary to pay the benefits issued to recipients by plaintiffs. Defendant would then provide a check to plaintiffs' representative upon review and acceptance of the reconciliation form. Defendant provided plaintiffs with the reconciliation forms, which identified the month of the bill, the name of the provider, the amount the provider invoiced defendant, the amount of exceptions for that month, the net amount due, the payment generated, and any possible balance due to ineligibility. At the end of the day, the account would zero out. The System would not permit payment for recipients who had become ineligible for benefits. Upon signing a reconciliation form, plaintiffs acknowledged and accepted that the amounts in the form represented "a complete reconciliation of the shelter payment for th[e] month," and "that all amounts due are paid and the exceptions are noted."

In December 2007, defendant's Municipal Council passed a resolution to transfer the administration and management of the EA Program to the County of Essex. In approximately March 2008, defendant and the County of Essex notified all shelter providers that the transfer would take place on June 30, 2008. The County of Essex notified all shelter providers of a mandatory meeting to discuss the transfer. At the meeting, defendant advised all shelter providers to submit to it all claims prior to June 30, 2008. Defendant explained that after June 30, 2008, it would lose its ability to process any claims because thereafter the County of Essex would be administering the EA program. On June 30, 2008, the County of Essex took over the placement and payment of the recipients, and defendant ceased its administration of the EA Program.

On or about November 1, 2008, plaintiffs submitted invoices to defendant for services allegedly rendered from September 2007 to February 2008. Plaintiffs maintain that defendant did not satisfy those invoices.*fn2

In February 2009, plaintiffs filed a breach of contract complaint against defendant and the State of New Jersey.*fn3

Plaintiffs sought damages for outstanding invoices and alleged that defendant was unjustly enriched.

In June 2011, defendant filed a motion for summary judgment and argued that (1) no contract existed between the parties, (2) it was not unjustly enriched, and (3) if a contract existed, then plaintiffs' complaint is barred by the doctrines of laches, accord and satisfaction, impossibility, and by public policy. Plaintiffs opposed the motion, asserted that defendant was equitably estopped from asserting that there was no contract, and contended that their complaint was not barred by the doctrine of laches.

On July 22, 2011, the trial judge conducted oral argument and issued an eleven-page oral opinion. She rejected plaintiffs' estoppel argument and concluded that the duties and obligations of the parties were governed by statute and regulations. The judge stated that "plaintiff[s] ha[ve] failed to raise a genuine dispute as to whether there was an existing contract . . . [and thus] the defendant's [m]otion for [s]ummary

[j]udgment must be and hereby is granted." This appeal followed.

On appeal, plaintiffs argue that the judge misapplied the law and failed to understand the facts. Plaintiffs contend that a contractual relationship existed between the parties based on their years of working together through the EA Program. They argue that the parties' "usage and custom" demonstrated an intention to enter into a contract. Plaintiffs maintain that defendant is equitably estopped from asserting that no legally enforceable contract exists.*fn4 We conclude that there are no genuine issues of material fact and the judge's ruling on the law was correct.

The Act limited defendant's power to enter into a contract regarding temporary or emergency housing services for the needy. Defendant is considered a "municipality" pursuant to the Act. The Act defines a "municipality" as "any city . . . governed by a board of commissioners or an improvement commission which administers general public assistance to [certain individuals] through the Work First New Jersey program." N.J.S.A. 44:8-108 (emphasis added). The Act further provides that State aid for public assistance for the municipalities and counties of this State shall be administered and distributed by the commissioner[*fn5 ] in the manner prescribed by this act and shall be paid by the commissioner to the several municipalities and counties entitled thereto, under this act, from the Municipal Aid Fund and from other funds appropriated from the State treasury for such purposes, which shall be drawn upon for said purposes on the orders of the commissioner, in accordance with the provisions of this act, and shall be disbursed as other funds are disbursed from the State treasury. [N.J.S.A. 44:8-110 (emphasis added) (footnote omitted).]

The State of New Jersey "shall provide, through each municipality or county, as appropriate, public assistance to the persons eligible." N.J.S.A. 44:8-114(a). The State's public policy seeks to provide public assistance to those in need, and "the funding of such public assistance is the responsibility of the State." N.J.S.A. 44:8-109. Public "assistance shall be fully funded by the State and administered by a local assistance board or the county welfare agency according to law." N.J.S.A. 44:8-114(a).

The Act authorizes a municipality to transfer the administration of the EA Program to the county in which the municipality is located:

[a] municipality may, by mutual agreement with the county in which it is located, provide for the transfer from its municipal welfare agency to the county welfare agency of the financial and operational responsibility for the administration of general public assistance provided . . . to residents of that municipality. In that event, the municipal welfare agency shall be abolished and all its functions, powers and duties transferred to the county welfare agency no later than the 60th day after the effective date of the transfer. [N.J.S.A. 44:8-145.1(a).]

Here, defendant transferred to the County of Essex the responsibility to administer the EA Program.

Plaintiffs interacted with defendant, a municipal body authorized to administer the EA Program. "[M]unicipal bodies in this State have no powers other than those delegated by the Legislature, and must perform their prescribed activities within the statutory ambit." Sinclair Refining Co. v. Cnty. of Bergen, 103 N.J. Super. 426, 433 (App. Div. 1968) (citing Scatuorchio v. Jersey City Incinerator Auth., 14 N.J. 72, 85 (1953)), certif. denied, 53 N.J. 272 (1969). Thus, there are statutory limitations applicable to defendant. "Although a public body may make contracts, it can only do so within its express or implied authority." Ibid. (citing Midtown Props., Inc. v. Twp. of Madison, 68 N.J. Super. 197, 208 (Law Div. 1961), aff'd o.b., 78 N.J. Super. 471 (App. Div. 1963)). Thus, "municipalities are but creations of the State, limited in their powers and capable of exercising only those powers of government granted to them by the Legislature." Wagner v. Mayor & Mun. Council of Newark, 24 N.J. 467, 474 (1957).

We reject plaintiffs' contention that their relationship with defendant from 1989 to 2008 is proof of a contractual relationship. "[A] municipality cannot bind itself by a perpetual contract, or a contract of unreasonable duration, unless by legislative sanction." Borough of West Caldwell v. Borough of Caldwell, 26 N.J. 9, 31 (1958). Pursuant to N.J.S.A. 40A:11-15, contracts for the performance of services may not exceed twenty-four consecutive months and cannot exceed twelve consecutive months for professional services. Defendant did not and was not authorized to bind itself to a perpetual contractual relationship with plaintiffs.

Plaintiffs argue that defendant breached its contractual duty by failing to notify plaintiffs when a recipient's case had been closed. N.J.A.C. 10:90-9.1(a) mandates that a "county or municipal agency shall provide adequate notice to . . . [a] recipient . . . of any action to be taken that affects the . . . recipient's benefits." The regulation does not require that notice must be given to shelters or hotels when a recipient's case has been closed. Moreover, defendant could not have breached any alleged duty to notify plaintiffs because defendant lacked statutory authority to enter into a contract with plaintiffs to provide temporary or emergency housing services. In this regard, the judge stated that "any communication beyond the scope of the statute [was], therefore, unjustified."

We reject plaintiffs' argument that defendant is "equitably estopped from asserting that there is no legally enforceable contact." Plaintiffs acknowledge that "[i]n order to apply equitable estoppel, there must be justified and reasonable reliance by plaintiffs." Parties "who deal with a municipality are charged with notice of limitations imposed by law upon the exercise of that power." Kress v. La Villa, 335 N.J. Super. 400, 410 (App. Div. 2000) (citing Midtown Props., Inc., supra, 68 N.J. Super. at 208), certif. denied, 168 N.J. 289 (2001). "A municipality in exercising the power delegated to it must act within such delegated power and cannot go beyond it. Where the statute sets forth the procedure to be followed, no governing body, or subdivision thereof, has the power to adopt any other method of procedure." Id. at 410-11 (citing Midtown Props., Inc., supra, 68 N.J. Super. at 207).*fn6 Therefore, no justifiable and reasonable reliance exists here.

In support of plaintiffs' contention that their course of dealing with defendants established a contractual relationship, they rely on the Restatement (Second) of Contracts § 223 comment b (1981), that "[t]here is no requirement that an agreement be ambiguous before evidence of a course of dealing can be shown." (emphasis added). Plaintiffs overlook the fact that an agreement must first exist before course of dealing is considered. Here, there was no such statutorily authorized agreement.

Lastly, for a municipality to accept a contract, even by silence, it must first be authorized to enter into contracts. See Sinclair Refining Co., supra, 103 N.J. Super. at 433 (stating that "[a]lthough a public body may make contracts, it can only do so within its express or implied authority"). The Act did not provide defendant with authority to enter into a contract with plaintiffs to administer the EA Program.


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