Opinion
CIVIL NO. 97-3255 (JBS).
January 25, 1999
Richard V. Jones, Esq., Samuel J. Thomas, Esq., Bressler, Amery Ross, Florham Park, New Jersey, Morristown, New Jersey, Attorneys for Plaintiff.
Matthew B. Wieliczko, Esq., Zeller and Bryant, Cherry Hill, New Jersey, Attorney for Defendant.
OPINION
This matter came before the Court upon the motion of defendant, City of Atlantic City, for partial summary judgment alleging that the plaintiff's claim for a portion of damages ($100,955.00) alleged in the Complaint (out of a total of $206,338.00) is barred by the six-year statute of limitations for contractual claims, N.J.S.A. 2A:14-1. Defendant asserts that as to this sum, the cause of action accrued on December 7, 1990, and the Complaint was not filed until more than six years passed, on June 23, 1997. Plaintiff asserts that the statute of limitations was equitably tolled by defendant Atlantic City's actions due to an alleged agreement between the parties in 1991 that any payment upon this debt would not be due until January of 1992, and that the Complaint was therefore timely filed within six years thereafter. For the reasons stated herein, this Court agrees with the plaintiff, and the defendant's partial summary judgment motion will be denied.
I. BACKGROUND
The facts relevant to deciding this motion, as established by affidavits and admissible evidence and taken in a light most favorable plaintiff as the non-movant, are as follows.
The Court acknowledges that the parties have also filed cross motions for summary judgment on all aspects of plaintiff's claims in this matter. This Order makes no rulings with respect to those motions, except to the extent that defendant's cross motion for summary judgment references and incorporates the arguments contained in defendant's partial summary judgment motion. The relevant facts as listed here do not constitute findings of fact binding on the remainder of this case, nor do they establish the totality of the facts in this case.
Between 1966 and 1973, plaintiff American Casualty Company of Reading, Pennsylvania ("CNA"), one of the CNA Insurance Companies, issued fourteen workers' compensation insurance policies to defendant, City of Atlantic City ("Atlantic City"). (Peterson Aff. ¶ 2.) These policies provided for retrospective premiums. The retrospective computations can result in either a premium owed by Atlantic City to CNA or a return premium to be paid to Atlantic City by CNA. The premiums are calculated on an annual basis for each policy. (Id. at ¶ 3.)
On January 24, 1990, Daniel J. Peterson, an Account Manager for CNA, sent a letter to Georgeanna Buckalew, the Risk Manager for Atlantic City, which included Invoice H. 04366 reflecting a return premium to Atlantic City of $103,766.00. (Id. at ¶ 7 and Ex. A.) Buckalew sent a letter on January 30, 1990, noting "I really have no questions concerning this particular retroadjustment at this time. Please send the return premium of $103,766.00 promptly." (Id. at ¶ 8 and Ex. B.) That check was issued on February 16, 1990. (Id. at ¶ 9.)
On November 7, 1990, Peterson sent a letter to Buckalew along with Invoice H 07008. The Invoice reflected premiums owed by Atlantic City equaling $100,955.00 for retrospective computations as of October 1, 1990 and noted that payment of the invoice was due on December 7, 1990. (Id. at ¶¶ 10-11 and Ex. D.) At the request of Buckalew, Peterson sent documentation of seven claims, accounting for the amount billed on November 7, 1990. (Id. at ¶ 12 and Ex. E.) On January 16, 1991, Buckalew sent a letter to CNA which stated her own review of these documents and which countered CNA's request for $100,955.00 with her own calculation of the amount due. The letter then stated as follows: "Our 1991 Budget cycle is concluded. Any retro payment to CNA would have to be planned for 1992. I am interested in the cost to close out this contract, in addition to the retro-calculation for 10/1/90." (Id.)
On December 11, 1991, Peterson sent a facsimile to Buckalew concerning the charges on Invoice H 07008 and attached an explanation of the retro-calculations that Buckalew had requested in her January 16, 1991 letter. In this facsimile, Peterson stated that "[t]his fax is just a reminder that we expect payment for this in January of 1992." (Id. at ¶ 14 and Ex. F.) According to Peterson, "[t]he due date for payment of Invoice H07008 was extended to January of 1992 based on Ms. Buckalew's prior statement that it could not be factored into the 1991 Budget Cycle." (Id. at ¶ 14.)
On December 19, 1991, Peterson sent a letter to Buckalew further explaining the retro-calculation valued as of October 1, 1990 and Invoice H 07008. (Id. at ¶¶ 15, 16, 19, and Ex. G.) This letter confirmed a telephone conversation between Peterson and Buckalew held on December 11, 1991 in which Buckalew had advised that the amount billed under Invoice No. H 07008 would not be provided for in the 1992 budget. The Peterson letter noted that Invoice H 07008 did not reflect increases of reserves for active claims as Buckalew had believed, but, rather, that the majority of the amount due was caused by the error in the retrospective computation valued as of October 1, 1989 (money that was included in the $103,766.00 check sent to Atlantic City in February 16, 1990).
Peterson gave the explanation for this error, as Buckalew had requested. Peterson's letter further explained that the invoice did not reflect increases of reserves for active claims as Ms. Buckalew had believed, but that the majority of the invoiced premiums "is the recouping of the money returned, in error, in 1989 on the Foley claim." (Id.) Peterson's letter explained CNA's position that CNA's Accounting Department had made an error in updating the value of the Foley claim for October 1, 1989, because "[t]he total value of the [Foley] claim should have been $150,448 and the Account Department reflected the claim value as $50,448, or a difference of $100,000. The overall return premium as of the 10/1/89 evaluation was $103,776. The 10/1/90 adjustments which are at issue produce an additional premium of $100,955." (Id., Ex. G.) The letter further stated that "we have no further recourse but to place this account into legal collections as this receivable is over a year old." (Id. at ¶¶ 15, 16 and Ex. G.) CNA issued a new invoice, Invoice HO 01002, which requested immediate payment of $100,955.00 for the retrospective computation valued as of October 1, 1990. (Id. at ¶ 17.)
On December 31, 1991, Buckalew sent a letter to Peterson at CNA in which she indicated that she was having "a difficult time getting [her] specific points reviewed and addressed. How can you expect any payment of this magnitude to be authorized if our questions/challenges remain unanswered? You can put our account into collection but the City of Atlantic City stands firm concerning our requirement of a full and complete justification of your 10/1/90 billing." (Peterson Aff. Ex. H.)
On June 24, 1997, plaintiff CNA filed suit in this Court alleging that defendant Atlantic City owed plaintiff $206,338.00 in retrospective premiums, $100,955.00 of which stem from the October 1, 1990 billing, and $105,383 of which stem from retrospective premiums calculated after that date. Defendant Atlantic City filed the instant partial summary judgment motion, arguing that plaintiff is barred from collecting $100,955.00 of the $206,338.00 by the applicable statute of limitations. (Def.'s Br. at 8.) That motion is now before this Court.
II. DISCUSSION
Summary judgment should be granted when the pleadings and supporting materials show that no genuine issue as to any material fact exists and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Kowalski v. L F Products, 82 F.3d 1283, 1288 (3d Cir. 1996).
The statute of limitations applicable to a suit on a policy of insurance is six years from the date upon which the cause of action accrued. N.J.S.A. 2A:14-1. See Walkowitz v. Royal Globe Ins. Co., 149 N.J. Super. 442, 448 (App.Div. 1977). In New Jersey, a cause of action on a debt arises when the debt become due, for that is the point at which an action can be maintained to enforce the obligation.Burlington County Country Club v. Midlantic Nat'l Bank South, 223 N.J. Super. 227, 231 (Ch.Div. 1987.)
According to CNA's letter to Atlantic City of November 7, 1990 and the attached Invoice H 07008, $100,955.00 was due on December 7, 1990. UnderBurlington County Country Club, supra, then, the six year statute of limitations on plaintiff's cause of action to recoup the $100,955.00 began to run on December 7, 1990, and it ended on December 7, 1996. As plaintiff did not file its lawsuit until June 24, 1997, the statute of limitation would bar plaintiff from recouping the $100,955.00 allegedly owing to it from its October 1, 1990 retro-adjustment, unless equitable tolling applies.
Plaintiff argues that equity demands that the statute of limitations not bar its claims because it granted Atlantic City a one year extension to pay the $100,955.00. (Pl.'s Br. at 11-12.) If the contract had been modified to extend the time to pay to January of 1992, the statute of limitations would not have begun to run until January of 1992, and plaintiff's suit filed 5 ½ years after that date would not be time-barred.
Contracts may be modified by mutual assent, as demonstrated by the fact that a proposed modification by one party was accepted by the other, and there must be new or additional consideration for the modification.County of Morris v. Fauver, 153 N.J. 80, 100 (1998). An agreement to extend the time for payment is a contract modification, and like other contract modifications, it must be supported by mutual assent and consideration. There is a difference between agreement as to quantum and agreement as to timing. In this case, while there is evidence that the parties did not reach an agreement as to the amount due, there is also evidence from which a factfinder could find that there was assent by CNA to Atlantic City's request to extend the time to pay until January 1992.
A statute of limitations may be equitably tolled by a promise to pay or an acknowledgment of the debt which creates the implication of such a promise; if the acknowledgment is coupled with a promise that is conditional, neither the promise nor acknowledgment will suffice unless the condition has been performed. Bassett v. Christensen, 127 N.J.L. 259, 261 (E A 1941) (citing Howell v. Wallace, 18 N.J. Misc. 48, 51 (1940).
To equitably estop a defendant from asserting the statute of limitations, there must be express or overt conduct which lulls the plaintiff into believing that the defendant will pay or will not assert the statute of limitations if suit is necessary, W.V. Panghorne Co. v. N.J. DOT, 116 N.J. 543, 546 (1989), such as by an express promise to pay or an acknowledgment of debt or by an extensive series of settlement negotiations. Id. However, mere inquiry into the validity of an invoice is not enough to confer that necessary level of acknowledgment or promise. Deluxe Sales and Serv., Inc. v. Hyundai Eng'g Constr. Co., LTD., 254 N.J. Super. 370, 378 (App.Div. 1992).
To avoid the statute of limitations by equitable tolling under these circumstances, CNA must proffer evidence from which a factfinder could find both (a) an agreement that payment could be deferred until January, 1992, and (b) that the condition upon such payment — namely, Buckalew's January 16, 1991 demand for an explanation and justification of the amount billed ($100,955.00) — was met by Peterson's December 1991 written and oral explanations.
Here, as noted above, reasonable jurors could find, based on the evidence presented, that there was an agreement to defer time for payment, even if there was not consideration sufficient for that agreement to constitute an actual contract modification. Moreover, reasonable jurors could find that language in Buckalew's letter of January 16, 1991 implied a condition upon which payment would be made in 1992 — namely, agreement as to the validity of the amount of the debt owed — and that Peterson's detailed explanations of the CNA error on the Foley account, which were given in December, 1991, supra, satisfied that condition.
This Court is mindful that the New Jersey Supreme Court has found inquiry into the validity of a debt much more extensive than that in the case sub judice not to rise to the level necessary to lull. See W.V. Panghorne Co., 116 N.J. at 555-556 (defendant engaged in a series of inquiries and requests for documents, and even suggested administrative review; defendant's actions in checking the validity of a claim are not enough to lull a plaintiff into a false sense of security). UnlikePanghorne, however, the present case presents a situation where the alleged debtor asked for and received a specific extension of time in which to make payment, albeit conditioned upon the receipt of a more complete explanation of the invoiced amount. There need not be agreement that a specific amount was due in order to extend the date for collection if an adequate itemized explanation is given. Buckalew indeed disputed that the net amount it owed was as great as Peterson had calculated, but even under Buckalew's calculation there was an acknowledgment that Atlantic City owed some money, which she calculated as $23,328 in her January 16, 1991 letter. (Peterson Aff., Ex. E.)
Equitable tolling is to be the exception, and not the rule. See Windsor Card Shops, Inc. v. Hallmark Cards, Inc., 957 F. Supp. 562, 569 (D.N.J. 1997) (citing Knight v. Brown Transp. Co., 806 F.2d 479, 484 (3d Cir. 1986). The tendency is to rule in favor of the statute of limitations and against the construction of a statement as an acknowledgment or promise which will avoid its operation, Burlington County Country Club, 223 N.J. Super. at 235, and it is rarely invoked against public entities seeking to assert a claim, except to prevent manifest injustice, County of Morris, 153 N.J. at 104. In the present circumstance, unlike County of Morris, the public entity is defending against a claim for recoupment of money allegedly erroneously refunded to it. Equity does not require the Court to abrogate the parties' agreement to an extended, finite period in which to receive a more detailed explanation and pay any amount due. That Atlantic City disputed the amount of the October 1, 1990 adjustment does not rob the parties' tolling agreement of its vitality. Indeed, it is assumed that, as Peterson himself testified, Buckalew expressed disagreement with Peterson's figures throughout 1991. (Peterson Dep. at 109:6 to 110:18 and 177:22 to 178:8.) CNA instead seeks recognition of the prospect that a reasonable factfinder could agree with CNA's position that Buckalew requested more specific justification and an extension of time to pay whatever amount should be due until the next Atlantic City billing cycle in January, 1992, and that Peterson on behalf of CNA assented and provided both the extension and the specification requested. Indeed, in opposing this motion, CNA does not assert that Atlantic City agreed to pay the particular amount due, and that issue remains to be determined upon the merits.
Because plaintiff has raised a material factual dispute regarding the existence of the parties' mutual agreement to toll the accrual of this cause of action until January, 1992, defendant's motion for partial summary judgment must be denied.
III. CONCLUSION
For the foregoing reasons, defendant's motion for partial summary judgment will be denied without prejudice. The accompanying order is entered.
O R D E R
This matter having come before the Court upon the motion of defendant, City of Atlantic City, for partial summary judgment alleging that plaintiff's claim for a portion of damages ($100,955.00) alleged in the Complaint is barred by the six-year statute of limitations for contractual claims, N.J.S.A. 2A:14-1; and the Court having considered the submissions of the parties; and for the reasons expressed in the Opinion of today's date;
IT IS this ___ day of January, 1999, hereby
ORDERED that defendant's motion for partial summary judgment that plaintiff is barred from pursuing its claims related to the $100,955.00 allegedly due and owing from the October 1, 1990 retro-adjustment isDENIED WITHOUT PREJUDICE.