County of Morris v. Fauver

• Court: New Jersey Superior Court – Appellate Division
• Citation: 685 A.2d 1342,296 N.J.Super. 26
• Decision Date: 17 December 1996
• Parties: COUNTY OF MORRIS, Plaintiff-Appellant-Cross-Respondent, v. William FAUVER, Commissioner of the New Jersey Department of Corrections, the New Jersey Department of Corrections and the State of New Jersey, Defendants-Respondents-Cross-Appellants.

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296 N.J.Super. 26 685 A.2d 1342 COUNTY OF MORRIS, Plaintiff-Appellant-Cross-Respondent,
v.
William FAUVER, Commissioner of the New Jersey Department of
Corrections, the New Jersey Department of
Corrections and the State of New Jersey,
Defendants-Respondents-Cross-Appellants. Superior Court of New Jersey,
Appellate Division. Argued Oct. 28, 1996.
Decided Dec. 17, 1996.

[685 A.2d 1343]

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W. Randall Bush, First Assistant Morris County Counsel, argued the cause for appellant-cross-respondent[685 A.2d 1344] (Ronald Kevitz, Morris County Counsel, attorney; Mr. Bush, on the brief).

Andrew R. Sapolnick, Deputy Attorney General, argued the cause for respondents-cross-appellants (Peter Verniero, Attorney General, attorney; Mary C. Jacobson, Assistant Attorney General, of counsel; Ronald L. Bollheimer, Deputy Attorney General, of counsel; Mr. Sapolnick, on the brief).

Before Judges PETRELLA, LANDAU and WALLACE.

The opinion of the court was delivered by

PETRELLA, P.J.A.D.

The County of Morris (County) entered into a forty-year contract with the State Department of Corrections (DOC) pursuant to the County Correctional Policy Act (the Act). The State provided funds to the County under the contract to upgrade and expand county correctional facilities. In return, the County agreed to house up to forty state prisoners per day in its facilities for the term of the contract. The eleventh paragraph of the contract provided payment provisions. Except for an initial period, the County was to be reimbursed at a rate equal to the average cost of housing state inmates at three state prisons. ¹

Based upon a letter from the Commissioner, the County submitted invoices to the State for reimbursement from 1985 to 1992 at a

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rate of $45 per inmate per day, mistakenly assuming that the figure was proper. After the County determined that the State was not reimbursing it commensurate with the average cost of the three state prisons, the County served a notice of claim under the New Jersey Contractual Liability Act, N.J.S.A. 59:13-1 et seq., dated April 7, 1992, and thereafter instituted suit. ²

On cross-motions for summary judgment, the motion judge concluded that neither party intended to breach the contract with regard to proper reimbursement. However, in so ruling, the judge found that the parties temporarily abandoned paragraph eleven. The judge then reinstated that provision for the remainder of the forty-year contract period.

I.

The facts may be succinctly stated. On May 11, 1983, Commissioner William Fauver (Commissioner) of the DOC, and the County entered into the Morris County Correctional Facilities Assistance Contract (the contract) pursuant to the County Correctional Policy Act, N.J.S.A. 30:8-16.3, et seq. (the Act), enacted in January 1982. The Act was designed to:

establish[ ] in the Department of Corrections a long-term, financial assistance program to provide State grants to participating counties to renovate and construct county correctional facilities so that county correctional services may be developed, implemented, operated and improved.

N.J.S.A. 30:8-16.5(a).

The Act generally permitted the State to arrange with counties to place state prisoners in county facilities. ³ Under these arrangements,[685 A.2d 1345]

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the State would provide grants to upgrade county correctional facilities and reimburse the participating county at per diem rates for housing state prisoners.

The County agreed "to construct a 40 bed addition and make renovations to the county correctional facility located within" the County of Morris. The parties acknowledged in paragraph two of the contract that the State Legislature appropriated $2,156,676 to the DOC to assist the County in meeting its construction costs under the agreement.

The third paragraph of the contract recited the language of the Act that:

the Legislature has directed that the terms and conditions of said agreement should provide for the availability and use of a specific number of beds to be reserved for use by prisoners remanded by the State as well as per-diem rates favorable to the State in recognition of its contribution to the construction costs of the facility; .... (emphasis supplied).

Paragraph eleven of the contract sets forth the method for determining the per diem rate of reimbursement by the DOC to the County for the costs of housing state prisoners:

11. The Department shall pay the County a per-diem rate for housing of State prisoners in the 40 cells reserved for such prisoners in the county correctional facility. The rate shall be 75% of the average of the budgeted daily costs of housing state prisoners in the State prisons at Trenton, Rahway and Leesburg during that fiscal year. The 75 per cent per-diem rate shall remain in effect until such time as the total monies retained by the Department because of the discount equals $120,680.00.[ ⁴] Thereafter, the County shall continue to make available to the Department a total of 40 cells for use by State prisoners, but the per-diem rate shall be 100 percent of the average daily cost of housing State prisoners in the State prisons at Trenton, Rahway and Leesburg during that fiscal year. The County shall continue to make 40 cells available to the Department for use by State prisoners for the useful life of the facility, as set forth in N.J.S.A. 40A:2-22 (forty years). At the end of this period, the Commissioner and the County shall reassess

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the need for continued use of the 40 cells by the Department, and may negotiate a continuation of this agreement upon such terms as are deemed appropriate.

According to the Commissioner's answers to interrogatories, "[t]he County of Morris began to house state inmates pursuant to the MCCFAC [the contract] in Fiscal Year 1986, beginning with the period October 1, 1985, through December 31, 1985." Although the interrogatory answers asserted that at that time, "the average of the budgeted daily costs of housing state prisoners in the state prisons at Trenton [New Jersey State Prison], Rahway [East Jersey State Prison] and Leesburg [Bayside State Prison] ... for Fiscal Year 1986 was $36.51," a September 7, 1984 letter from the Commissioner to the sheriff's captain administering the county jail stated:

Please be advised that the Department of Corrections has increased the per diem rate for housing State-sentenced inmates in the county facilities to $45.00 effective July 1, 1984. This rate will be paid through Fiscal Year 1985 to all counties who are housing State-sentenced inmates beyond the fifteen-day exclusionary period.

In establishing the new per diem rate, I have taken into consideration the fact that State-sentenced inmates housed in county facilities will occasionally require medical treatment. Accordingly, medical expenses [685 A.2d 1346] such as medication, both prescription and non-prescription, and any routine medical services provided by the county medical staff will not be considered for reimbursement.

The State contends that this letter concerned only those inmates housed in county facilities pursuant to the Disaster Control Act, N.J.S.A. App. A:9-30, et seq., and the numerous executive orders issued thereunder, ⁵ rather than under the parties' contract. The letter is silent in this respect. Nothing in the letter would put the County on notice that the State was not complying with or did not intend to comply with the contract.

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From the date the County began housing state prisoners in 1985 through September 1994, the County submitted to the State invoices at a per diem rate of $45 in reliance on the above letter, rather than requesting from the State any confirmation of the per diem rate pursuant to paragraph eleven of the contract. Neither the State nor the County ever questioned the propriety of this amount.

On April 7, 1992, by notice of claim pursuant to the New Jersey Contractual Liability Act, N.J.S.A. 59:13-1, et seq., the County notified Commissioner Fauver of the DOC that it was in breach of the payment provisions of the contract. The notice recited that:

[t]he State has been paying the County at the rate of $45.00 per prisoner per day purportedly based on the State's average per diem rate. However, on October 23, 1989 William H. Fauver, Commissioner of the New Jersey Department of Corrections testified under oath in United States District Court Civil Action No. 82-1946 entitled "Camden County, et al. v. John J. Parker, Warden, et al." that the cost to house a state sentenced prisoner in the Trenton State facility was $63.00 per day....

Furthermore, based upon information and belief, the present average cost to house a State prisoner is approximately $65.00 per day.

The notice concluded with a request for $2,604,000, representing the twenty-dollar difference between $65 and $45 for forty celled prisoners for 3,255 days claimed under the contract from May 11, 1983. Nevertheless, the County apparently continued to send invoices requesting reimbursement at the $45 per diem rate without qualification until January 1995.

The State refused to reimburse the County at the $65 rate or to acknowledge a breach of the contract. On October 14, 1992, the County filed suit against the State. On December 17, 1992, the Commissioner filed an answer admitting the existence of the contract, but denying its breach. After a period of discovery, the County moved for partial summary judgment, demanding $407,879.97 for the "total differential of monies due and owing for FY 1988 thru 2nd Qtr FY 1993." The Commissioner cross-moved for summary judgment.

After oral argument, the motion judge, in a December 5, 1994 letter opinion, granted the Commissioner's cross-motion. The

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judge's opinion noted that the terms of the contract were "not entirely clear and are somewhat ambiguous." Despite that premise, the judge found that both parties ignored the contract's payment scheme:

It is clear that when Commissioner...