Henderson v. CCMUA

• Decision Date: 08 July 2003
• Citation: 826 A.2d 615,176 N.J. 554
• Parties: Sheila HENDERSON, Plaintiff-Respondent, v. CAMDEN COUNTY MUNICIPAL UTILITY AUTHORITY, Defendant-Appellant.
• Court: New Jersey Supreme Court

826 A.2d 615

176 N.J. 554

Sheila HENDERSON, Plaintiff-Respondent, v. CAMDEN COUNTY MUNICIPAL UTILITY AUTHORITY, Defendant-Appellant.

Supreme Court of New Jersey.

Argued March 4, 2003.

Decided July 8, 2003.

Warren W. Faulk argued the cause for appellant (Brown & Connery, attorneys).

James Greenberg argued the cause for respondent (Wolf, Block, Schorr and Solis-Cohen, attorneys; Mr. Greenberg and Gregory A. Lomax, Cherry Hill, of counsel and on the briefs).

Daniel P. Reynolds, Senior Deputy Attorney General, argued the cause for amicus curiae Attorney General of New Jersey (Peter C. Harvey, Acting Attorney General, attorney; Patrick DeAlmeida, Deputy Attorney General, of counsel).

Melville D. Miller, Jr., President, submitted a brief on behalf of amicus curiae Legal Services of New Jersey (Mr. Miller, attorney; Mr. Miller, Dawn K. Miller and Bertram P. Goltz, Jr., Edison, on the brief).

The opinion of the Court was delivered by ZAZZALI, J.

This appeal requires us to determine whether Section 41 of the Municipal and County Utilities Authority Law, N.J.S.A. 40:14B-1 to -70 (MCUAL), authorizes municipal and county utilities authorities to charge compound interest on delinquent customer accounts. We conclude that N.J.S.A. 40:14B-41 authorizes only simple interest. Because this appeal presents a matter of first impression and retroactive application could lead to substantial inequitable results, we also conclude that our decision applies prospectively.

I

Pursuant to the MCUAL, defendant Camden County Municipal Utilities Authority (CCMUA) provides Camden County residents with water and sewer services. Plaintiff Sheila Henderson has been a customer of CCMUA for over eleven years. Henderson ceased making regular payments to CCMUA in 1993 and received notice seven years later that her property was subject to a municipal lien and tax sale. At that time, Henderson owed CCMUA $3,485.63, including $1,749.02 in interest charges. After Henderson inquired about the "accuracy of the bill and the excessive interest charges," CCMUA informed her that it had compounded interest on her delinquent account. Henderson eventually paid that entire bill, including the compound interest charges, to avert the tax sale of her property.

Henderson then filed a class action complaint, alleging that CCMUA's assessment of compound interest was unlawful because N.J.S.A. 40:14B-41 authorized only simple interest. Henderson sought a judgment declaring null and void all previously assessed compound interest charges, enjoining CCMUA from charging any further compound interest on delinquent accounts, and awarding monetary damages, costs, and attorneys' fees.

The trial court construed N.J.S.A. 40:14B-41 to allow CCMUA to charge compound interest and entered summary judgment for CCMUA. In an unreported decision, the Appellate Division reversed, concluding that the statute did not authorize compound interest, and remanded for further proceedings. Henderson moved before the trial court for an order granting class certification and CCMUA petitioned this Court for certification. The Appellate Division stayed the class certification proceedings pending the disposition of CCMUA's petition by this Court. We granted certification. 174 N.J. 365, 807 A.2d 196 (2002).

II

The MCUAL grants municipalities and counties the power to create independent authorities to provide basic utilities services. N.J.S.A. 40:14B-4. Those authorities finance their operations by assessing service charges to property owners and occupants. N.J.S.A. 40:14B-21 to -23. Section 41 of the MCUAL states:

In the event that a service charge of any municipal authority with regard to any parcel of real property shall not be paid as and when due, interest shall accrue and be due to the municipal authority on the unpaid balance at the rate of 1 1/2% per month until such service charge, and the interest thereon, shall be fully paid to the municipal authority.

[ (Emphasis added).]

CCMUA argues that the term "unpaid balance" includes interest charges that previously have accrued. Accordingly, it asserts that the statute permits it to charge compound interest, or "[i]nterest paid on both the principal and the previously accumulated interest," Black's Law Dictionary, 817 (7th ed.1999), at the rate of 1 1/2% per month on the sum of any outstanding service charges and any outstanding unpaid interest. Henderson disagrees, arguing that this Court should read the term "unpaid balance" to include only the sum of any unpaid service charges and not any accrued interest. She asserts that the statute authorizes only simple interest, or "[i]nterest paid on the principal only and not on accumulated interest." Ibid.

We begin our analysis by noting that the statute does not define the term "unpaid balance," and is susceptible on its face to the interpretations advanced by both parties. "If conflicting interpretations of a statute are plausible, a reviewing court should not regard that statute's meaning to be self-evident." In re Passaic County Util. Auth., 164 N.J. 270, 299, 753 A.2d 661 (2000) (citing National Waste Recycling, Inc. v. Middlesex County Improvement Auth., 150 N.J. 209, 223, 695 A.2d 1381 (1997)). Instead, it should employ extrinsic aids, such as legislative intent or prior precedent, to interpret the language at issue. Id. at 300, 753 A.2d 661 (citing Bergen Commercial Bank v. Sisler, 157 N.J. 188, 205, 723 A.2d 944 (1999)).

Because compound interest "unduly hastens the accumulation of debt," courts regard it as unfairly "harsh and oppressive." Abramowitz v. Washington Cemetery Ass'n, 139 N.J. Eq. 293, 296, 51 A.2d 461 (Ch.1947). Accordingly, compound interest is disfavored at common law. See Shadow Lawn Sav. & Loan Ass'n v. Palmarozza, 190 N.J.Super. 314, 317, 463 A.2d 384 (App.Div.1983); Crest Sav. & Loan Ass'n v. Mason, 243 N.J.Super. 646, 648, 581 A.2d 120 (Ch.Div.1990); Abramowitz, supra, 139 N.J. Eq. at 296-97, 51 A.2d 461; Force v. City of Elizabeth, 28 N.J. Eq. 403, 405 (Ch. 1877), rev'd on other grounds, 29 N.J. Eq. 587 (E. & A. 1878). "No statute is to be construed as altering the common law, farther than its words import." Velazquez v. Jiminez, 172 N.J. 240, 257, 798 A.2d 51 (2002) (quotations and citations omitted). Thus, the Legislature's failure to deviate explicitly from the common-law presumption against compound interest suggests that N.J.S.A. 40:14B-41 authorizes only simple interest. See Hensley v. West Virginia Dep't of Health & Human Res., 203 W.Va. 456, 508 S.E.2d 616, 625 (1998) (interpreting statute to permit only simple interest in absence of explicit legislative authorization of compound interest); Nation v. W.D.E. Elec., Co., 454 Mich. 489, 563 N.W.2d 233, 236 (1997) (same); Metropolitan Prop. & Liab. Ins. Co. v. Ralph, 138 N.H. 378, 640 A.2d 763, 767-68 (1994) (same); Powell v. Retirement Bd. of Allegheny County, 431 Pa. 396, 246 A.2d 110, 115 (1968) (same).

The statute's legislative history also is instructive. In 1981, the Legislature increased the interest rate authorized by N.J.S.A. 40:14B-41 from 1% to 1 1/2% per month. The Assembly Sponsors' Statement referred only to an increase in the interest rate charged on "delinquent user charges" and made no mention of charging interest on unpaid interest. Sponsors' Statement, Assembly Bill No. 855 (Feb. 4, 1980); L. 1981, c. 530. Moreover, the Governor's Statement in respect of the proposed increase noted that the increase in the authorized interest rate was intended to "parallel recent increases permitted on delinquent real property tax payments" undertaken in a 1979 amendment to N.J.S.A. 54:4-67. Governor's Objections and Recommendations, Assembly Bill No. 855 (Jan. 7, 1982); L. 1981, c. 530. That amendment increased from 12% to 18% the annual interest rate ceiling on tax delinquencies in excess of $1500. L. 1979, c. 435, § 1. We note that simple interest charged pursuant to N.J.S.A. 40:14B-41 at a rate of 1 1/2% per month would mirror the 18% annual interest rate ceiling set forth at N.J.S.A. 54:4-67. By contrast, compounding interest under N.J.S.A. 40:14B-41 could result in an annual interest rate that exceeds the 18% annual rate ceiling. Thus, to the extent that the increase of the interest rate authorized by N.J.S.A. 40:14B-41 to 1 1/2% was intended to "parallel" the increase in the annual rate ceiling of N.J.S.A. 54:4-67 to 18%, it suggests that the "interest" contemplated by N.J.S.A. 40:14B-41 is simple and not compound interest.

Finally, we note that when the Legislature has authorized compound interest, it has done so explicitly. See, e.g., N.J.S.A. 17B:25-9 (providing for payment of indebtedness to insurer "all with interest at a specified rate and which may be compounded as specified"); N.J.S.A. 40:3-21 (providing for payment into special sinking fund "until the deficiency with interest compounded annually at three and one-half per cent from January first, one thousand nine hundred and seventeen, is accumulated"); N.J.S.A. 54:4-3.69 (providing for application of roll-back taxes to property "with interest compounded at 8% annually").

For the forgoing reasons, we conclude that the term "interest" as it appears in N.J.S.A. 40:14B-41 refers to simple interest only. As a corollary, we also conclude that the term "unpaid balance" contemplates unpaid service charges only and not accrued unpaid interest. We therefore hold that N.J.S.A. 40:14B-41 permits utilities authorities to charge only simple interest and that it was improper for CCMUA to assess interest on a principal composed in part of unpaid interest charges.

III

We now decide whether to apply this decision prospectively. "Generally, judicial decisions are applied retroactively to all civil matters that have not reached final judgment." Frazier v. New Jersey Mfrs. Ins. Co., 142 N.J. 590, 606, 667 A.2d 670 (1995). However, "prospective application is appropriate when a decision establishes a new principle of law by overruling past precedent...