(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interests of brevity, portions of any opinion may not have been summarized).
v. Township of Middletown (A-116-98)
Argued January 3, 2000 -- Decided February 9, 2000
GARIBALDI, J., writing for a unanimous Court.
The issue in this appeal is whether a municipality may be equitably estopped from terminating post
retirement health benefits of a former municipal employee where that employee has received and relied on those
benefits for a period of years.
Plaintiff, Irvin Beaver, was employed by Middletown Township as a police officer from October 11, 1966
until November 1, 1988. Prior to retiring, Beaver discussed with Township officials continuation of free health
benefits for himself and his family. Township officials repeatedly assured Beaver that he and his family would
receive such benefits upon retirement. These assurances were consistent with the collective bargaining agreement
between the PBA, Beaver's collective bargaining representative, and the Township.
Beaver received free health benefits for himself and his family for approximately ten years after his
retirement. In January 1998, intervenor-respondent, Larry S. Loigman, Esq., filed a complaint demanding review of
the Township's health insurance coverage to remove any ineligible employees and retired employees. Loigman cited
to N.J.S.A. 40A:10-23, which provides that retired municipal employees are required to pay the cost of coverage for
themselves and their dependents. The statute does permit a municipal employer, in its discretion, to assume the cost
of such coverage for employees, but only after 25 years or more of creditable service.
As a result of Loigman's complaint, the Township sent a letter to Beaver dated March 17, 1998 terminating
his benefits. Beaver paid $839 to temporarily continue coverage under COBRA for thirty days. Beaver and the
PBA filed a complaint on March 25, 1998, asserting improper termination of post-retirement health benefits by the
Township. The trial court dismissed the complaint, determining that Beaver was not entitled to post-retirement
health benefits. Simultaneously, the trial court granted summary judgment to Loigman in his action against the
Township.
Plaintiffs appealed. The Appellate Division granted plaintiff's motion for a stay of the termination of health
benefits pending appeal. In an unpublished opinion, the Appellate Division affirmed the trial court's ruling. The
Supreme Court granted plaintiffs' petition for certification.
HELD: The Township is equitably estopped from terminating Beaver's post-retirement health benefits.
1. The essential principle of estoppel is that one may, by voluntary conduct, be precluded from taking action that
would work injustice and wrong to another who with good reason and in good faith relied on that conduct. Equitable
estoppel is rarely invoked against a governmental entity, but it may be applied in appropriate circumstances unless
the application would prejudice essential governmental functions. (pp. 6-8)
2. Equitable estoppel cannot apply if the governmental action is “utterly beyond the jurisdiction” of the
governmental entity. Such action is ultra vires in the primary sense and void. This is not the case if the
governmental action is an “irregular exercise of a basic power under the legislative grant.” The latter action is ultra
vires in the secondary sense and does not preclude the application of estoppel. (pp. 8-9)
3. In 1988, policemen and firemen could qualify for “special retirement” if they had twenty-five years of actual
employment with a public entity. Beaver sought to qualify for “special retirement” by purchasing credit for four
years of service in the Navy (from 1962 to 1966). The collective bargaining agreement between the PBA and the
Township did not merely permit but required benefits to be paid for employees who had not completed twenty-five
years of service. Thus, there is no question that the agreement and payment of Beaver's benefits was ultra vires.
The Court holds, however, that it was ultra vires in the secondary sense as an “irregular exercise of a basic power.”
Support for that conclusion is found in the 1995 amendments to N.J.S.A. 40A:10-23, which gave employers the
discretion to grant benefits to retiring employees in Beaver's position. (pp. 9-14)
4. The Court finds that the Township is estopped from terminating Beaver's health benefits. Beaver was repeatedly
assured that he would continue to enjoy free medical benefits and, in reliance on those assurances, he retired while
still in his early forties with a family to support and two and one-half years shy of twenty-five years of actual service.
Although Loigman contends that there is no factual basis to support a finding of reliance, the Township has never
denied making such repeated assurances. Further, the Township in good faith granted Beaver his benefits for ten
years. The trial court's and Appellate Division's reliance on Wolfersberger v. Borough of Point Pleasant Beach,
305 N.J. Super. 446 (App. Div. 1996), as support for their denial of Beaver's medical expenses is misplaced. That case
lacks the critical element of reliance. Wolfersberger applied for benefits and was properly denied them. Unlike
Beaver, Wolfersberger never received benefits, and therefore could not allege reliance. (pp. 14-17)
Judgment of the Appellate Division is REVERSED.
CHIEF JUSTICE PORITZ and JUSTICES O'HERN, STEIN, COLEMAN, LONG and VERNIERO
join in JUSTICE GARIBALDI's opinion.
SUPREME COURT OF NEW JERSEY
A-
116 September Term 1998
MIDDLETOWN TOWNSHIP POLICEMEN'S
BENEVOLENT ASSOCIATION LOCAL NO.
124, on behalf of its members, and
all persons entitled to the
benefits of its Collective
Bargaining Agreement with
Defendant; and IRVIN BEAVER, on
behalf of himself and all other
persons similarly situated,
Plaintiffs-Appellants,
v.
TOWNSHIP OF MIDDLETOWN,
Defendant,
and
LARRY S. LOIGMAN,
Intervenor-Respondent.
Argued January 3, 2000 -- Decided February 9, 2000
On certification to the Superior Court,
Appellate Division.
David J. DeFillippo argued the cause for
appellants (Klatsky & Klatsky, attorneys).
Larry S. Loigman argued the cause pro se.
The opinion of the Court was delivered by
GARIBALDI, J.
Plaintiffs, Irvin Beaver ("Beaver”), a retired Middletown
Township police officer, and the Middletown Township Policemen's
Benevolent Association Local No. 124 (“PBA”), appeal from an
order for summary judgment in favor of Defendant, Middletown
Township (“Township”), declaring Beaver was not entitled to
medical benefits as a retired police officer of the Township.
The specific issue in this appeal is whether a municipality may
be equitably estopped from terminating post-retirement health
benefits of a former municipal employee where that employee has
received (and relied on) those benefits for a period of years.
The facts are not in dispute. The Township employed Beaver as a police officer from October 11, 1966 until November 1, 1988. Prior to his retirement in 1988, Beaver discussed with Township officials the continuation of free health insurance benefits for himself, his wife, and his two young children. Township officials repeatedly assured Beaver that he and his family would receive free health benefits upon his retirement.
The Township's assurances were consistent with Article XV of the collective bargaining agreement (“Agreement”) between the PBASee footnote 11 and the Township, which obligated the Township to provide free health insurance coverage “to all employees who have retired.” Under the Agreement, the free health benefits included “a health insurance plan . . . of a quality and continuing series of benefits at least equal to those provided by the New Jersey State Health Benefits Program Blue Cross/Blue Shield,” as well as dental insurance, and a prescription drug plan. Beaver retired on November 1, 1988, and received free health benefits for his entire family for approximately ten years.
However, in January 1998 Intervenor-Respondent, Larry S. Loigman, Esq. (“Loigman”), filed a prerogative writ complaint, and in March 1998 filed an amended prerogative writ complaint, in the Chancery Division of the Monmouth County Superior Court against the Township. Loigman's action demanded that the Township's health insurance coverage be reviewed to remove any ineligible municipal or retired employees. Specifically, Loigman contended that Beaver received post-retirement health benefits contrary to N.J.S.A. 40A:10-23, which provided, in part, that “[r]etired [municipal] employees shall be required to pay for the entire cost of coverage for themselves and their dependents.” N.J.S.A. 40A:10-23 (1988). However, the statute also stated that “[t]he employer may, in its discretion, assume the entire cost of such coverage and pay all of the premiums for employees who have retired . . . after 25 years or more service with the employer.” N.J.S.A. 40A:10-23 (1988)(emphasis added). According to Loigman, Beaver had not satisfied the statute's threshold requirement of 25 years of “actual service” to the employer, and therefore was not entitled to free post-retirement benefits.
As a result of Loigman's complaint, Edward Dunn, the Township's Assistant Administrator, sent Beaver a letter dated March 17, 1998 stating:
At the direction of the Township Attorney, I must inform you that the Township is legally unable to continue your current enrollment in the Township health plan. Therefore, effective today, your name will be removed from the retiree health enrollment listing. I understand the Township attorney has been in contact with you concerning this matter.
However, you can continue your health coverage for a period of up to 18 months under COBRA continuation coverage. You must pay a monthly premium for this coverage as outlined in the attached memo. Coverage under COBRA will be retroactive to this date so you can continue coverage without a lapse. You have 60 days to decide if you want to
enroll.
On March 20, 1998, as a result of the termination of his benefits by the Township, Beaver paid $839 to temporarily continue coverage for his family under COBRA for thirty days.
On March 25, 1998, PBA and Beaver filed a verified complaint in the Chancery Division of the Monmouth County Superior Court asserting improper termination of post-retirement health benefits by the Township. Plaintiffs also moved for an Order to Show Cause seeking an injunction against the termination of Beaver's benefits. Relying on Wolfersberger v. Borough of Point Pleasant Beach, 305 N.J. Super. 446 (App. Div. 1996), aff'd, 152 N.J. 40 (1997), the trial court dismissed the verified complaint, determining that Beaver was not entitled to continued post retirement health benefits.
Simultaneously, in Loigman v. Township of Middletown, the trial court granted Loigman's motion for summary judgment finding that the Township had provided free health benefits to ineligible retirees, including Beaver. The PBA and Beaver then moved to amend the judgment dismissing their complaint or, in the alternative, for a stay pending appeal to the Appellate Division.See footnote 22 The trial court denied plaintiffs' motion to amend the judgment and their motion for a stay, but entered an order permitting the PBA and Beaver to intervene in the matter of Loigman v. Township of Middletown. The issue that remained in that action was whether Beaver was required to reimburse the Township for the benefits received since his retirement in 1988.
Plaintiffs then appealed the grant of summary judgment. Prior to deciding the appeal, the Appellate Division granted plaintiffs' motion for a stay of the termination of health benefits. In an unpublished decision, the Appellate Division panel affirmed the trial court's ruling essentially for the reasons expressed by the trial court. We granted plaintiffs' petition for certification, see 161 N.J. 334 (1999), and now reverse.
The essential principle of the policy of estoppel here invoked is that one may, by voluntary conduct, be precluded from taking a course of action that would work injustice and wrong to one who with good reason and in good faith has relied upon such conduct. An estoppel . . . may arise by silence or omission where one is under a duty to speak or act. It has to do with the inducement of conduct to action or nonaction. One's act or acceptance may close his mouth to allege or prove the truth. The doing or forbearing to do an act induced by the conduct of another may work an estoppel to avoid wrong or injury ensuing from reasonable reliance upon such conduct. The repudiation of one's act done or position assumed is not permissible where that course would work injustice to another who, having the right to do so, has relied thereon.
[Summer Cottagers' Ass'n of Cape May v. City
of Cape May,
19 N.J. 493, 503-04 (1955)
(citations omitted).]
Equitable estoppel is “'rarely invoked against a
governmental entity.'” Wood v. Borough of Wildwood Crest,
319 N.J. Super. 650, 656 (App. Div. 1999) (quoting County of Morris
v. Fauver,
153 N.J. 80, 104 (1998) (citations omitted)).
However, equitable estoppel will be applied in the appropriate
circumstances unless the application would “'prejudice essential
governmental functions.'" Ibid. (quoting Vogt v. Borough of
Belmar,
14 N.J. 195, 205 (1954)).
Equitable considerations “are relevant in assessing
governmental conduct” and impose a duty on the court to invoke
estoppel when the occasion arises. Ibid. (citing Skulski v.
Nolan,
68 N.J. 179, 198 (1975)). In Skulski, the Court concluded
that “it [was] appropriate for [the Court] to weigh equitable
considerations, particularly the reliance factor” in determining
whether the termination of pensions previously granted by the
Hudson County Pension Commission was appropriate. Skulski,
supra, 68 N.J. at 198-99. The Court found particularly relevant
circumstances where pensioners “relied upon the pension award in
declining to secure subsequent full-time employment either within
or without the county, thereby foreclosing the opportunity to
secure alternate pension benefits.” Id. at 199.
In Skulski, we recognized that before an evaluation of the
equitable considerations in applying equitable estoppel may take
place, an examination of the nature of the governmental action is
required. Id. at 198. If the action by the municipality is
considered ultra vires, a court must consider whether the conduct
is ultra vires in the primary sense, or ultra vires in the
secondary sense:
There is a distinction between an act utterly
beyond the jurisdiction of a municipal
corporation and the irregular exercise of a
basic power under the legislative grant in
matters not in themselves jurisdictional. The
former are ultra vires in the primary sense
and void; the latter, ultra vires only in a
secondary sense which does not preclude
ratification or the application of the
doctrine of estoppel in the interest of
equity and essential justice.
[Ibid. (quoting Summer Cottagers' Ass'n of
Cape May, supra, 19 N.J. at 504.]
Actions that are ultra vires in the secondary sense will permit
the application of estoppel. Ibid; see also Summer Cottagers
Ass'n of Cape May, supra, 19 N.J. at 506 (holding that “the power
of sale was within the municipality's essential jurisdiction”
even if municipality failed to serve proper public notice as
required by statute); Jantausch v. Borough of Verona,
41 N.J.
Super. 89, 94-95 (Law Div. 1956), aff'd,
24 N.J. 326 (1957)
(holding that good faith granting of building permit was within
authority of municipal official even if official erroneously
interpreted municipal ordinances); Scardigli v. Borough of
Haddonfield Zoning Bd. of Adjustment,
300 N.J. Super. 314, 319-20
(App. Div. 1997) (holding that “municipality or any of its
agencies may be estopped if the circumstances involve reliance on
a good faith act of an administrative official, within the ambit
of that official duty, which constitutes an erroneous and
debatable interpretation of an ordinance.”)). Therefore, to
determine whether principles of equitable estoppel should be
applied to resolve this appeal, we must consider whether the
Township's extension of benefits to Beaver in 1988 was ultra
vires, and if so, whether it was ultra vires in the primary or
the secondary sense.
Retired employees shall be required to pay for the entire cost of coverage
for themselves and their dependents at rates which are deemed to be adequate to cover the benefits . . . .
The employer may, in its discretion, assume the entire cost of such coverage and pay all of the premiums for employees who have retired on a disability pension or after 25 years or more service with the employer, or have retired and reached the age of 62 or older with at least 15 years of service with the employer, including the premiums on their dependents, if any, under uniform conditions as the governing body of the local unit shall prescribe.
For the purposes of this section, “employer” was defined as
“the State of New Jersey, the county, municipality or political
subdivision thereof which pays the particular policeman or
fireman,” see N.J.S.A. 43:16A-1(6) (1988), and “service” was
defined as “service as a policeman or fireman paid for by an
employer,” see N.J.S.A. 43:16A-1(7) (1988).
On June 26, 1995, the Legislature amended N.J.S.A. 40A:10-23
to “broaden[] the categories of employees for whom municipalities
and counties may choose to assume the entire cost of providing
health and hospital benefit coverage after the employee's
retirement.” Assembly Local Government Committee Statement to
Assembly Bill No. 2588 (March 27, 1995). Specifically, the
amendment to N.J.S.A. 40A:10-23 deleted the language “25 years or
more service with the employer,” and replaced it with “25 years
or more of service credit in a State or locally administered
retirement system and a period of service of up to 25 years with
the employer at the time of retirement, such period of service to
be determined by the employer and set forth in an ordinance or
resolution as appropriate.” The legislative history of the
amendment confirms that the amendment was intended to “include
employees who have aggregated sufficient service credits in one
or more State or locally administered retirement systems.” Id.
In 1988, the Police and Firemen's Retirement System
permitted eligible retirees to qualify for “special retirement”
with twenty-five years of creditable service. N.J.S.A. 43:16A
11.1 (1988). “Creditable service” was defined as “service
rendered for which credit is allowed as provided under section 4See footnote 33
of this act.” N.J.S.A. 43:16A-1(8) (1988). Special retirement
entitled an employee to pension benefits as described in N.J.S.A.
43:16A-11.1. If an employee had not completed twenty-five years
of employment, yet sought special retirement, he or she could
purchase credits to qualify.
At the time of his retirement, Beaver sought to qualify for
“special retirement.” Although Beaver had been employed by the
Township for only twenty-two years, to qualify he purchased
credit based on his four years of service in the United States
Navy (from 1962 to 1966) by paying into an annuity savings fund.
Therefore, upon his retirement, Beaver had completed twenty-five
years of “creditable service,” but not twenty-five years of
actual “service” with the Township.
As indicated above, the Agreement between the PBA and the
Township offered continued health benefits “to all employees who
have retired.” That contract, therefore, did not comply with the
terms of N.J.S.A. 40A:10-23, because it permitted (in fact,
required) benefits to be paid to employees who had not completed
twenty-five years of “service,” and therefore was ultra vires.
Therefore, we must now consider whether the Agreement was ultra
vires in the primary or secondary sense.
In Wood, supra,
319 N.J. Super. 650, the Appellate Division
considered a similar collective bargaining agreement and held
that the contract was ultra vires in the secondary sense. In
that case, the Borough of Wildwood Crest granted plaintiff post
retirement health benefits, but terminated them after three
years. Id. at 652-53. The collective bargaining contract in
Wood granted continued health benefits “upon retirement,” yet did
not require a specified term of years to be eligible for
continued health benefits as required by N.J.S.A. 40A:10-23. Id.
at 653-54.
The Appellate Division held that the Borough was equitably
estopped from terminating the benefits, reasoning the collective
bargaining contract was not ultra vires in the primary sense,
because it was not “utterly beyond the jurisdiction” of the
Borough to enter into such an agreement with the PBA. Id. at
660-61. At most, the Wood Court considered the Borough's
agreement to be ultra vires in the secondary sense since it was
an “irregular exercise of a basic power.” Ibid. According to
the Appellate Division, “[t]o label the contract as ultra vires
in the primary sense and thus void would, constitute . . . a
'gross injustice.'” Id. at 661 (quoting Juliano v. Borough of
Ocean Gate,
214 N.J. Super. 503, 510 (Law Div. 1986)). We follow
the reasoning of Wood and hold that the Township's extension of
benefits to Beaver is ultra vires in the secondary sense because
the Agreement was merely an “irregular exercise of a basic power”
of the Township. Support for that conclusion is found in the
amended version of N.J.S.A. 40A:10-23 that now authorizes
municipal employers discretion to grant benefits to retiring
employees in Beaver's position.
When weighing “the reliance factor,” we find that equitable considerations prohibit the Township from terminating Beaver's post-retirement health benefits. But for the Township's representations to Beaver that his health benefits would be continued after retirement, Beaver could have waited and retired two and a half years later to guarantee those benefits. Second, the potential cost of monthly COBRA payments would impose a substantial burden on Beaver's resources. Third, Beaver relied in good faith on the assurances that health insurance benefits would be a part of his retirement package. Finally, after ten years of retirement, Beaver is effectively foreclosed from alternative employment opportunities that would offer him free health benefits for his family.
“[T]he rights of persons innocently entering into municipal contracts ha[ve] to be considered in order to avoid manifest injustice and legal wrong.” Wood, supra, 319 N.J. Super. at 657 (citing Summer Cottagers' Ass'n of Cape May, 19 N.J. at 505-06). A municipality will be equitably estopped from terminating benefits that were previously approved and relied upon by the recipient. See Miller v. Bd. of Trustees of the Teachers' Pension and Annuity Fund, 179 N.J. Super. 473, 479 (App. Div.), certif. denied, 88 N.J. 502 (1981) (reasoning that doctrine of equitable estoppel “is intended to prevent a party's disavowal of prior conduct if such repudiation would frustrate the demands of justice and good conscience.” (citations omitted)). The Township approved Beaver's retirement package and should be equitably estopped from terminating his health insurance benefits after extending those benefits for more than ten years.
Although the trial court and Appellate Division both relied on Wolfersberger, supra, 305 N.J. Super. 446, as support for their denial of Beaver's medical expenses, that reliance is misplaced. In 1993, Wolfersberger retired from the Point Pleasant Beach police force after twenty-three years of actual service. Id. at 448. Wolfersberger purchased credit for his time served in the United States Armed Forces to “make up the difference between what he had actually contributed to the annuity fund and what he would have contributed if he had worked the full twenty-five years” pursuant to N.J.S.A. 43:16A-11.11. Ibid. The collective bargaining agreement between Point Pleasant and the PBA stated that
any officer represented by this unit who has completed twenty-five (25) years of service shall remain within the Borough Medical Plan at husband and wife coverage at no expense to the employee upon retirement from the employ of Point Pleasant Borough.
[Ibid.]
After Wolfersberger applied for continued health benefits, the
Borough refused to pay for his post-retirement health insurance,
arguing that for the purpose of its collective bargaining
agreement and N.J.S.A. 40A:10-23, “service” means only actual
service. Id. at 449.
The Appellate Division upheld the denial of benefits to
Wolfersberger concluding that “service” under N.J.S.A. 40A:10-23
cannot be construed to mean the same as “creditable service”
under N.J.S.A. 43:16A-1, because of “the significant differences
in the language, purposes, and legislative history of the two
statutes.” Ibid. The court held that the Borough properly
denied Wolfersberger's benefits pursuant to the discretion
granted by N.J.S.A. 40A:10-23, which states that “[t]he employer
may, in its discretion, assume the entire cost of such coverage
for employees.” Id. at 450-51 (quoting N.J.S.A. 40A:10-23).
This case is easily distinguishable from Wolfersberger,
because that case lacks the critical element of reliance.
Wolfersberger applied for benefits and was properly denied them.
Unlike Beaver, Wolfersberger never received benefits, and
therefore he could not allege a claim of reliance. Accordingly,
the principle of estoppel could not be applied.
CHIEF JUSTICE PORITZ and JUSTICES O'HERN, STEIN, COLEMAN, LONG, and VERNIERO join in JUSTICE GARIBAlDI's opinion.
NO. A-116 SEPTEMBER TERM 1998
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
MIDDLETOWN TOWNSHIP POLICEMEN'S
BENEVOLENT ASSOCIATION LOCAL NO.
124, on behalf of its members, and all persons
entitled to the benefits of its Collective Bargaining
Agreement with Defendant; and IRVIN BEAVER,
on behalf of himself and all other persons similarly
situated,
Plaintiffs-Appellants,
v.
TOWNSHIP OF MIDDLETOWN,
Defendant,
and
LARRY S. LOIGMAN,
Intervenor-Respondent.
DECIDED February 9, 2000
Chief Justice Poritz PRESIDING
OPINION BY Justice Garibaldi
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1 1 Throughout Beaver's tenure as a police officer, the PBA served as the collective bargaining representative for the Township's police officers. Footnote: 2 2 From that point on, the Township declined to appear at any of the proceedings. Footnote: 3 3 “Section 4" provided: “Only service as a policeman or fireman paid for by an employer, which was rendered by a member since he became a member, or, since he last became a member in case of a break in service, plus service, if any, covered by a prior service liability, shall be considered as creditable service for the purposes of this act . . .” N.J.S.A. 43:16A-4 (1988).