KIYOTAKA INOUE v. BOARD OF REVIEW

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4212-10T2

KIYOTAKA INOUE,

Appellant,

v.

BOARD OF REVIEW and INOUE

CORP.,

Respondents.

_____________________________

March 11, 2013

Submitted October 30, 2012 - Decided

Before Judges Messano and Ostrer.

On appeal from the Board of Review, Department of Labor, Docket No. 291,341.

Kiyotaka Inoue, appellant pro se.

Jeffrey S. Chiesa, Attorney General, attorney for respondent Board of Review (Lewis A. Scheindlin, Assistant Attorney General, of counsel; Alan C. Stephens, Deputy Attorney General, on the brief).

Respondent Inoue Corp. has not filed a brief.

PER CURIAM

Claimant appeals from the Board of Review's decision that he was ineligible for unemployment benefits because the corporation that he owned and employed him had not been dissolved and remained a viable entity. We affirm.

We discern the following facts from the record. Claimant was president and sole shareholder of Inoue Corp., which operated a restaurant in South Hackensack beginning in 2001. At the end of October 2008, Inoue Corp. entered into a contract to sell its restaurant business, including certain specified business assets, such as its fixtures, equipment, telephone number, and lease, but not including any licenses. After the sale in October, claimant ceased working at the restaurant. After an unsuccessful search for work, he filed for unemployment benefits in December 2008.

Although Inoue Corp. had ceased operating the restaurant, it retained its liquor license until it could be transferred to the restaurant's buyer in August 2009. The corporation's bank accounts remained open at least until then, although the record does not reflect when they were closed. Claimant wrote in his September 2010 appeal to the Board of Review, "[I]t took months to work out the paperwork [regarding the liquor license transfer] and we finally closed in August 2009. I closed [the] business bank account and was expecting the accountant to close the business with New Jersey." He indicated he had not yet filed his 2009 tax return. The record reflects that Inoue Corp. received a tax clearance certificate in October 2010 from the Division of Taxation, evidencing payment of all State taxes due. A certificate relative to the corporation's dissolution was filed and recorded by the Treasury Department on June 20, 2011.

Pursuant to a claim filed as of December 14, 2008, claimant received $11,679 in unemployment benefits for the weeks ending December 20, 2008 through December 5, 2009. On July 8, 2010, the Deputy for the Director of the Division of Employment Insurance notified claimant his claim was invalid because, "You are the owner of the corporation upon which your claim is based. You have not dissolved the corporation." The Division requested a refund,1 and the claimant appealed.

At a testimonial hearing in September 2010, claimant could not confirm the corporation had been dissolved. The Appeal Tribunal thereafter affirmed the director's determination of ineligibility. The Appeal Tribunal relied on N.J.S.A. 43:21-19(m)(1)(A), which provides that a person shall not be deemed unemployed in any week during the person's "term of office or ownership" of a corporation in which the person has at least a five percent interest, and on N.J.A.C. 12:17-12.1, which provides that a corporation is deemed viable "unless it has permanently ceased operations and has filed for formal dissolution . . . or has filed for bankruptcy[.]" The Appeal Tribunal also affirmed the refund request, based on N.J.S.A. 43:21-16(d), which authorizes the collection of refunds when, for any reason, conditions for request of benefits were not fulfilled. The Board of Review affirmed on March 17, 2011, and this appeal followed.

In his initial brief, claimant challenges only the determination of ineligibility, arguing, "Claimant sold his business and did not have a business at the time of receiving benefit[s]. Therefore, he should not have been disqualified for benefit[s]." In his reply brief, claimant argues that if he were ineligible, the payments were made solely as a result of the Division's error, and therefore, pursuant to N.J.A.C. 12:17-14.3, he should only have to refund the benefits, as a fifty-percent offset against any future benefits he might receive. We are unpersuaded.

Our scope of review is limited. Brady v. Bd. of Review, 152 N.J. 197, 210 (1997). We will intervene only if the agency's action was arbitrary, capricious or unreasonable, or it was "'clearly inconsistent with its statutory mission or with other State policy.'" Ibid. (quoting George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 27 (1994)). We accord "'substantial deference to the interpretation of the agency charged with enforcing an act.'" N.J. Tpk. Auth. v. Am. Fed'n of State, Cnty. & Mun. Emps., Council 73, 150 N.J.331, 351 (1997) (quoting Merin v. Maglaki, 126 N.J.430, 436-37 (1992)). We also give some deference to an agency's interpretation of its own regulations. SeeUtley v. Bd. of Review, 194 N.J.534, 551 (2008). We do so in part because the agency that drafted and promulgated the rule should know its meaning. Essex Cnty. Bd. of Taxation v. Twp. of Caldwell, 21 N.J. Tax.188, 197 (App. Div.), certif. denied, 176 N.J.426 (2003).

The facts regarding the dissolution of Inoue Corp. are undisputed. Based thereon, we discern no error in the Board's decision to affirm the determination of ineligibility. Employees of ongoing corporations are eligible for unemployment benefits, unless they are officers or owners of more than five percent of the equity or debt. N.J.S.A. 43:21-19(m)(1) (stating that officer or five-percent owner "shall not be deemed to be unemployed in any week during the individual's term of office or ownership in the corporation"). The distinction between officers and significant owners on one hand, and other corporate employees on the other hand, is intended to prevent an officer or owner's manipulation of one's own unemployment and eligibility for benefits. Nota v. Bd. of Review, 231 N.J. Super. 341, 343-44 (App. Div. 1989). However, an officer or significant owner is eligible to receive benefits if the corporation itself is no longer viable, which is deemed to occur if the corporation "has been dissol[ved] in accordance with the New Jersey Business Corporation Act, N.J.S.A. 14A:1-1 et seq.; or has filed for bankruptcy under Chapter 7 of the United States Bankruptcy Code." N.J.A.C. 12:17-12.1.

Claimant bears the burden to show that he or she is entitled to unemployment benefits. Brady, supra, 152 N.J. at 218. Based on the clear language of the regulation and statute, claimant was ineligible for the benefits he received, as Inoue Corp. did not dissolve until 2011, long after claimant's benefit period. Nor was there substantial compliance with the law. For many months after claimant ceased working at the restaurant, his corporation remained a viable entity, retaining a valuable asset, its liquor license. Even after the liquor license transfer, it is unclear from the record when Inoue Corp. transferred its remaining assets, including proceeds of the license transfer, and closed its bank accounts. However, the corporation had not paid its State taxes as of September 2010.

The result here is consistent with the determination affirmed in Fernicola v. Board of Review, 335 N.J. Super. 523, 523-26 (App. Div. 2000). The Board denied benefits to a part-owner of a corporation that ceased operating a restaurant, but continued to collect debts and retained its liquor license. We upheld N.J.A.C. 12:17-12.1 as "consonant" with N.J.S.A. 43:21-19(m)(1), although we acknowledged, "There may be instances in which a claimant might argue that there has been substantial compliance with these provisions, because the corporation has completely ceased business and has formally commenced corporate dissolution proceedings which have not been completed." Id. at 525. However, as in Fernicola, those are not the facts before us.

Claimant also argues that his obligation to refund benefits should be limited to a fifty-percent offset of any future benefits he may receive. If an employee receives benefits that were not rightfully due, they must be repaid. N.J.S.A. 43:21-16(d). This is so, even if the employee acted in good faith in seeking benefits, expended the benefits in reliance on the initial determination, and would face difficulty repaying the benefits. Bannan v. Bd. of Review, 299 N.J. Super. 671, 674-76 (App. Div. 1997). However, claimant rests his argument on N.J.A.C. 12:17-14.3, which states:

A payment of benefits for which a waiver of recovery is not granted must be repaid in full. The Division may use any means of collection provided by law to satisfy the debt including, but not limited to, offsets permitted under N.J.S.A. 54A:9-8.1 and 8.2. Any individual with an outstanding overpayment who subsequently becomes entitled to benefits shall have such benefits offset by the debt until the debt is repaid in its entirety. However, for any claimant whose overpayment is determined to be the sole result of the Division's error, the offset amount shall be limited to 50 percent of the claimant's weekly benefit rate for each week of benefits subsequently claimed.

[(Emphasis added).]

The agency has interpreted the regulation to mean that the offset is the only means of collection of an overpayment resulting solely from agency error. 41 N.J.R. 263(a), 266 (Jan. 5, 2009).

However, we shall not reach claimant's argument, which was raised for the first time in his reply brief. It is improper to raise an issue for the first time in a reply brief. See, e.g., Goldsmith v. Camden Cnty. Surrogate's Office, 408 N.J. Super. 376, 387 (App. Div.), certif. denied, 200 N.J. 502 (2009). Moreover, there is no evidence that claimant presented this argument to the agency. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973) (acknowledging that appellate courts generally will decline to consider questions or issues not properly presented to the trial court). Although claimant asserts in his brief that he disclosed his corporate ownership in his application, the application is not part of the record.

Nor can we fairly determine, on this sparse record, whether the overpayment was the "sole result of the Division's error," N.J.A.C. 12:17-14.3. We do not address whether a claimant, even one acting in good faith, bears some responsibility when seeking benefits for which he or she is ineligible. Any claim for relief under N.J.A.C. 12:17-14.3 should, in the first instance, be presented to the Division. A claimant who seeks this limited form of collection under the regulation must file an appropriate form with the agency. 41 N.J.R. 263(a), 266 (Jan. 5, 2009). We express no opinion as to the timeliness or merits of such an application for limited collection.

1 Although the refund request is referenced in the statement of items comprising the record on appeal, it is not in the record before us.