COUNTY OF HUDSON v. STATE OF NEW JERSEY DEPARTMENT OF CORRECTIONS

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

COUNTY OF HUDSON,

Plaintiff-Appellant,

v.

STATE OF NEW JERSEY,

DEPARTMENT OF CORRECTIONS,

Defendant-Respondent.

_______________________________________________________________

October 29, 2014

Submitted April 30, 2014 Decided

Before Judges Sapp-Peterson, Lihotz and Maven.

On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4705-08.

Chasan Leyner & Lamparello, PC, attorneys for appellant (Steven L. Menaker, of counsel; Kirstin Bohn and Maria P. Vallejo, on the brief).

John J. Hoffman, Acting Attorney General, attorney for respondent (Lisa A. Puglisi, Assistant Attorney General, of counsel; Joseph M. Micheletti, Deputy Attorney General, on the brief).

The opinion of the court was delivered by

MAVEN, J.A.D.

This appeal arises out of the continuing dispute between plaintiff County of Hudson (County) and defendant State of New Jersey, Department of Correction (State) concerning the parties' 1987 and 1988 Facility Assistance Contracts (contracts). The County appeals from the February 21, 2013 Law Division order that granted summary judgment in favor of the State and dismissed its 2008 complaint seeking reimbursement for certain State inmates housed in the Hudson County Correctional Center (HCCC) since September 2006. We affirm.

I.

This is the third time we have been called upon to review these contracts. In this appeal, the County raises the following issues for our review

I. THE TRIAL COURT FAILED TO APPLY THE PLAIN LANGUAGE OF THE AGREEMENTS.

A. The Language of the Agreements is Unambiguous.

B. The Trial Court Inappropriately Considered Extrinsic Evidence as an Aid in Contract Interpretation.

1. The State's Policies Manual is Neither Part of the Agreements Nor a Codification of the Parties' Practices.

2. The Parties Did Not Modify or Abandon the Agreements.

II. THE TRIAL COURT MISINTERPRETED N.J.S.A. 2C:43-10(e).

We derive the relevant facts from the record submitted with the motion for summary judgment.

In 1987 and 1988, the County and State entered into two contracts, which provided that, in exchange for the State's advancement of capital costs for the construction of correctional facilities, the County would provide space in HCCC for the State's use in housing State prisoners. See generally Cnty. of Morris v. Fauver, 153 N.J. 80, 88-89 (1988) (describing the New Jersey's executive and legislative actions in response to the prison overcrowding problem). The contracts fixed the number of cells or beds that would be made available for State inmates at HCCC, defined which State prisoners would be eligible for housing at HCCC, and established the per diem rate at which the County was to be compensated.

The contracts defined "State prisoner" as "persons who are now or may hereafter be sentenced to serve, or who are actually serving or may hereafter be serving, a custodial term in a correctional facility within the jurisdiction of the New Jersey Department of Corrections." The contracts made no mention of the types of prisoner to which it was referring.

In 1995, the State adopted an administrative manual which set out a uniform reimbursement policy applicable for all counties, which included the procedures used to prepare the per diem reimbursement summaries and monthly reports, and specified which State inmates and parole violators were eligible for reimbursement (the "Manual").

The Manual provides reimbursement for,

a. a State sentenced inmate who has been housed in a county jail beyond the fifteenth calendar day from his/her date of sentence; unless an inmate is returned to the county as a result of a WRIT []; or

b. a parole violator, not serving a county sentence, will be reimbursed from the later of: being housed in a county jail beyond the fifteenth calendar day from his/her return to custody; or date of warrant enforcement; or

c. a parole violator, who is also serving a concurrent county sentence, housed in a county jail beyond the fifteenth calendar day from the expiration of the county sentence.

According to Allison DelVecchio, a long-term employee in the County Purchase Service Unit (CPSU), the State sends a monthly report, along with a copy of the manual, and a document entitled, "Housing Per Diem Reconciliation Procedures," to the County requesting its approval prior to disbursing the payment. The County is permitted to submit a reconciliation in order to challenge the accuracy of the Department's monthly reimbursement report.1

In 2004, the County filed a single-count complaint alleging that the State had not reimbursed for certain inmates housed in HCCC. The court permitted the County to file an amended complaint in September 2005 to assert additional claims, namely that the State had not provided reimbursement (1) for cells above 100 cells used by the State to house state prisoners, (2) for the first fifteen days that each state prisoner was housed at the HCCC, and (3) for housing parole violators (the 2004 Litigation). Id. at 8. On cross-motions for summary judgment, the trial court granted the motion in favor of the County and entered judgment in the amount of $8,585,220.49 as reimbursement for those State inmates housed at HCCC from June 2003 through October 2007. In June 2008, the State appealed the trial court's order of judgment.

Shortly thereafter, in September 2008, and pending appeal of the judgment concluding the 2004 Litigation, the County initiated this matter alleging a continuing breach of the reimbursement provisions of the contracts for inmates housed at HCCC since September 2006 (2008 Litigation). The 2008 complaint alleged the same claims as the 2004 Litigation and added three additional claims. The 2008 complaint alleged the State breached the contracts by

(a) failing to pay the County for a minimum of 100 cells reserved each day for use by the State;

(b) failing to pay the County at the per diem rate for cells above 100 cells used by the State to house state prisoners;

(c) failing to pay the County for the first fifteen days that each State prisoner was housed at the HCCC;

(d) failing to pay the County in full to house State parole and Intensive Supervised Parole [ISP] prisoners who are awaiting final hearings;

(e) failing to pay the County in full to house State prisoners who were remanded by the Courts to the HCCC ("Temp in Trans");

(f) failing to pay the County in full to house every State prisoner for every day the prisoner was in the HCCC.

In July 2009, the trial court entered a stay of the 2008 Litigation pending the issuance of our decision on the 2004 Litigation.

In an unpublished opinion issued on July 30, 2009, we found the County had not provided proper notice of the claims raised in its amended complaint as required by the Contractual Liability Act (CLA), N.J.S.A. 59:13-1 to -10. Cnty. of Hudson v. Dep't of Corr., No. A-5135-07 (App. Div. July 30, 2009) (slip op. at 11) (Hudson I). Upon our review of the claims raised in the original 2004 complaint, we disagreed with the trial court's interpretation that the contracts required reimbursement of those claims. Id. at 11-12. We reversed the trial court's order of judgment and dismissed the original and amended complaints with prejudice. Id. at 14. The County sought certification before the Supreme Court, which was granted. Cnty. of Hudson v. State, 201 N.J. 49 (2010).

The Court reviewed the contracts and other evidence in the record regarding the State's prisoner reimbursement policy and procedures before deciding the primary issue in before it, namely, whether the County complied with the notice requirements of CLA. Cnty. of Hudson v. Dept. of Corr., 208 N.J. 1, 4 (2011) (Hudson II). The Court determined the State's payment practice excluded the first fifteen days from the reimbursement calculation as to certain prisoners and parole violators, which practice became embodied in the State's 1995 Policy Manual and was generally reinforced in the monthly documents that accompanied payments. Id. at 18. Moreover, the Court determined the methodology was grounded on the State's longstanding interpretations about how and when an individual becomes a State inmate. Id. at 17. Based upon its conclusions, the Court addressed the substance of the issue before it and, ultimately, affirmed the dismissal of the 2004 Litigation. Id. at 24. Thereafter, the 2008 Litigation continued.

Between September and November 2012, the parties filed cross-motions for summary judgment. On November 16, 2012, the trial court heard oral argument. The County argued it was entitled to reimbursement for all State prisoners for every day they are housed at HCCC. The County maintained the matter should be summarily resolved in its favor by applying the plain, unambiguous language of the contracts, which did not include any language that would preclude full reimbursement for the specific types of inmates raised in the 2008 complaint. The County acknowledged there were no factual disputes to preclude the grant of summary judgment. The County also argued the Appellate Division's July 2009 and the Supreme Court's June 2011 decisions were not dispositive of the claims raised in its complaint. The County conceded that the claims relating to reimbursement for the 100 reserved beds regardless of their use, and the per diem rate for cells above 100 cells used by the State (paragraphs a and b, respectively) had been resolved by the Appellate Division in its 2009 decision. Those claims are not being challenged in this appeal.

The State asserted the County should be precluded from re-litigating the contract claims contained in the 2008 complaint under the doctrines of collateral estoppel and res judicata because our July 2009 decision and the Court's June 2011 decision on the 2004 Litigation addressed the County's claims. Alternatively, the State argued the court should apply the parties' past practice and course of dealing to resolve the County's claims because the contracts did not specifically address the four claims raised in the 2008 complaint.

On February 21, 2013, the judge denied the County's motion and granted the State's motion for summary judgment in a comprehensive oral decision. First, the trial court rejected the State's collateral estoppel argument, noting that while the 2004 and 2008 complaints were similar (1) the 2008 complaint added claims for different types of State inmates, and (2) the prior decisions concerned only procedural issues and did not address the substantive claims raised in the 2004 Litigation.

Next, the judge found the contracts did not intend to address all of the agreements between the State and the County with respect to the method of payment for State inmate's housing in the County jail. Because the contracts were silent and "contained no clear contract term specifying when payment is to begin," the court looked to extrinsic evidence of the parties' course of dealing prior to and after entering into the contracts to determine the parties' understanding with respect to the payment methodology for the first fifteen days of a State inmate's housing at HCCC. In that regard, the court acknowledged the undisputed testimony of the County Counsel and of DelVecchio that the State never paid the County for the first fifteen days. The court also considered the Manual, the applicable provision of the penal code, and the monthly reconciliation reports and upon doing so, concluded that the reimbursement practice for the contracts provide for

(1) payment for ordinary State inmates beginning on the sixteenth day;

(2) payment for parole violators who committed only technical violations from the first day of the inmate's re-incarceration in HCCC;

(3) no payment for parole violators who were charged with a new offense in addition to violating their parole, until the new charge had been adjudicated;

(3) no payment for an ISP violator who is housed at HCCC inmate sentence, until such time as the ISP panel resentences the inmate to the custody of the DOC;

(4) no payment for temps in transit, as these inmates who are returned to the County on a writ are specifically excluded from reimbursement in the Manual;

(5) no payment for an inmate's last partial day.

Upon finding there were no genuine issues of material fact and considering all of the evidence in the light most favorable to the County, the judge granted summary judgment to the State on the County's claims. This appeal followed.

II.

On appeal, as it argued before the trial court, the County contends the language in the contracts unambiguously establishes its right to payment for all categories of State inmates housed at HCCC for every day of the inmate's stay. Thus, it argues, the trial court erred by considering extrinsic evidence to interpret the meaning of the contracts. We agree with the motion judge, that the contracts' silence regarding reimbursement for the first fifteen days, parole and ISP violators, temps in transit, and an inmate's last day creates, at the very least, an ambiguity.

"A basic principle of contract interpretation is to read the document as a whole in a fair and common sense manner." Hardy v. Abdul-Matin, 198 N.J. 95, 103 (2009). "If the terms of a contract are clear, they are to be enforced as written." Malick v. Seaview Lincoln Mercury, 398 N.J. Super. 182, 187 (App. Div. 2008) (citing Morris, supra, 153 N.J. at 103). On the other hand, "[w]here a contract is ambiguous, courts will consider the parties' practical construction of the contract as evidence of their intention and as controlling weight in determining a contract's interpretation[.]" Morris, supra, 153 N.J. at 103.

To discover the intention of the parties, and to determine whether a contract is ambiguous, courts may consider extrinsic evidence offered in support of conflicting interpretations. Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 268-69 (2006). In Conway, the Supreme Court held that our courts will "consider all of the relevant evidence that will assist [them] in determining the intent and meaning of [a] contract. This is so even when the contract on its face is free from ambiguity." Id. at 269. The terms of the parties' written agreement may be explained or supplemented by evidence of their course of dealing. Cumberland Cnty. Imp. Auth. v. GSP Recycling Co., 358 N.J. Super. 484, 496 (App. Div. 2003).

Here, the contracts do not contain language that expressly direct when payments begin or for the type of State inmate for which reimbursement is due. The court applied extrinsic evidence not to contradict the written agreements, but to better understand it and give force to the parties' conduct and course of dealing. See Conway, supra, 187 N.J. at 269. Finally, the motion judge, in addressing the County's claimed entitlement to reimbursement for parole violators, intensive supervision program (ISP) violators and "temps in transit" housed at its facility, once again considered, primarily, the parties' past practices, an approach. Based upon our review of the record, we concur with this approach and discern no basis upon which to disturb the legal conclusions reached by the motion judge on these claims.

Any remaining issues raised by the County, which we have not specifically addressed in this opinion, are without sufficient merit to warrant mention in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.

1 DelVecchio also testified that the reimbursement policy was amended in 1999 by a letter regarding parole violators, but could not recall the other 1999 letter that issued regarding ISP violators. Both letters are in the record.