Opinion
DOCKET NO. A-0500-12T4
03-23-2016
PAIGE LAND DEVELOPMENT CORP., Plaintiff-Appellant/Cross-Respondent, v. BOROUGH OF RIVERDALE, Defendant-Respondent/Cross-Appellant.
Robert Mahoney argued the cause for appellant/cross-respondent (Norris, McLaughlin & Marcus, attorneys; Walter G. Reinhard and Bradford W. Muller, on the brief). Anthony P. Seijas argued the cause for respondent/cross-appellant (Cleary Giacobbe Alfieri Jacobs, attorneys; Brad A. Baldwin on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Fuentes, Koblitz and Gilson. On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-472-12. Robert Mahoney argued the cause for appellant/cross-respondent (Norris, McLaughlin & Marcus, attorneys; Walter G. Reinhard and Bradford W. Muller, on the brief). Anthony P. Seijas argued the cause for respondent/cross-appellant (Cleary Giacobbe Alfieri Jacobs, attorneys; Brad A. Baldwin on the brief). PER CURIAM
This appeal and cross-appeal arise out of disputes concerning $98,400 in fees paid over the course of a decade pursuant to a municipal sewage ordinance. Plaintiff Paige Land Development Corporation (Paige) appeals the trial court's grant of summary judgment in favor of the Borough of Riverdale (Riverdale) holding that Paige was not entitled to a refund of the fees under the volunteer rule. Riverdale cross-appeals the summary judgment determination that its Ordinance § 136-19 D(2), under which Paige paid the fees, was ultra vires because it conflicted with N.J.S.A. 40A:26A-10, -11. We affirm.
I.
Riverdale is a non-member customer of the Pequannock River Basin Regional Sewerage Authority (Sewerage Authority). The Sewerage Authority does not own a treatment plant; instead, it contracts with other authorities to use their plants. Following the extension of Route 287 in the 1990s, real estate values in Riverdale increased. To facilitate future growth, Riverdale paid approximately $1.3 million to purchase an additional 150,000 gallons per day of sewage allocations to be used for future development.
In connection with that expanded sewage capacity, Riverdale passed Sewer Ordinance § 136-19 D (the Non-user Ordinance). Section one of that ordinance provides that private parties can reserve sewage capacity by paying Riverdale a proportional percentage of the cost the Borough incurred to obtain that sewage capacity, plus a 5% administrative cost. Borough of Riverdale, N.J., Sewer Ordinance § 136-19 D(1). Section two of the Non-user Ordinance requires that a party who has purchased reserved sewage capacity pay an annual non-user fee, which is calculated based on the amount of gallons reserved.
Paige acquired forty-two acres in Riverdale in 1975 and used that land to operate a summer camp. In 1996, Paige decided to close the camp and sell its property for development. To help facilitate that anticipated sale, in 1997 Paige entered into a contract with Riverdale to reserve 6000 gallons per day of sewage capacity. Paige paid Riverdale $60,000 for that reserved capacity in accordance with section one of the Non-user Ordinance. In addition, in accordance with section two, Paige paid Riverdale an annual non-user fee of $9600, which was paid quarterly.
Paige paid Riverdale a total of $98,400 in non-user fees from approximately 1998 to 2008. During that same period of time, Paige sold portions of its property in Riverdale for over $10 million, but only transferred 300 of its 6000 gallon per day reserved sewage capacity. In 2008, Paige stopped paying the non-user fee. Thereafter, representatives of Paige met with Riverdale officials to discuss the non-user fee, but no resolution was reached.
In 2011, Paige filed suit against Riverdale in the Chancery Division alleging that the non-user fee was illegal and seeking a refund of the $98,400 it had paid in fees, together with 18% interest. Paige did not challenge the $60,000 it paid as the cost for reserving the 6000 gallons of sewage capacity. The parties filed cross-motions for summary judgment and the action was transferred to the Law Division to proceed as a complaint in lieu of prerogative writs in a summary proceeding.
Following oral arguments, the Law Division judge invalidated the Non-user Ordinance holding that it was ultra vires because it exceeded Riverdale's authority in violation of the Municipal and County Sewerage Act, N.J.S.A. 40A:26A-1 to -22 (MCSA). The judge also denied Paige's request for a refund, ruling that the payments fell under the "volunteer rule" because the payments were made for approximately ten years without protest.
II.
Paige appealed and Riverdale cross-appealed. On appeal, Paige argues (1) the Non-user Ordinance is ultra vires, and (2) Paige did not voluntarily pay the fees, the volunteer rule is inapplicable, and Paige is entitled to a refund, plus interest. Riverdale, on its cross-appeal, argues (1) Paige's action should have been barred as an untimely action in lieu of prerogative writs and the trial judge abused his discretion in enlarging the general forty-five day limitation period for such actions provided in Rule 4:69-6(a); (2) the Non-user Ordinance was a proper exercise of municipal authority and was not ultra vires; (3) the volunteer rule precludes Paige's request for a refund; and, in the alternative, (4) the doctrines of laches and waiver preclude Paige's request for a refund.
We stayed this appeal and cross-appeal pending a decision by the Supreme Court in 388 Route 22 Readington Realty Holdings, LLC v. Twp. of Readington, 221 N.J. 318 (2015). In May 2015, the Supreme Court issued its ruling. As it turns out, that case did not address the issues raised in this appeal. --------
A.
We will first address whether the trial court abused its discretion by relaxing the forty-five day time period to file an action in lieu of prerogative writs.
Rule 4:69-6(a) requires that an action in lieu of prerogative writs must be filed no later than "[forty-five] days after the accrual of the right to the review, hearing or relief claimed." A court may, however, enlarge this period "where it is manifest that the interest of justice so requires." R. 4:69-6(c). There are three general situations that qualify for enlargement: "(1) important and novel constitutional questions; (2) informal or ex parte determinations of legal questions by administrative officials; and (3) important public rather than private interests which require adjudication or clarification." Borough of Princeton v. Bd. of Chosen Freeholders, 169 N.J. 135, 152 (2001) (quoting Brunetti v. Borough of New Milford, 68 N.J. 576, 586 (1975)).
This list, however, is non-exhaustive. Hopewell Valley Citizens' Grp., Inc. v. Berwind Prop. Grp. Dev. Co., 204 N.J. 569, 583-84 (2011). A court has discretion to enlarge the period of time "when it perceives a clear potential for injustice." Id. at 578; see R. 4:69-6(c). In determining whether to enlarge the time, the "public interest must be balanced against 'the important policy of repose expressed'" by the rule. Hopewell Valley, supra, 204 N.J. at 580 (quoting Reilly v. Brice, 109 N.J. 555, 559 (1988)).
Here, the trial court concluded that Paige did not timely file its action within the time restriction required by Rule 4:69-6(a). The court found, however, that the "public interest" exception the Court recognized in Borough of Princeton applied, reasoning that the "non-user fees charged by the [Riverdale] Non-user Ordinance, if improper, constitute a continuing violation of public rights." We discern no abuse of discretion in the trial court's determination that the interests of justice warranted an expansion of the time period.
B.
Next, we address the question of whether Riverdale's Non-user Ordinance was ultra vires. We review a grant or denial of summary judgment using the same standard as the trial court. State v. Perini Corp., 221 N.J. 412, 425 (2015). Accordingly, as the trial court's decision concerning the Non-user Ordinance was a legal determination, we review that decision on a de novo basis. Town of Kearny v. Brandt, 214 N.J. 76, 91 (2013).
Riverdale's sewage ordinance, like all ordinances, is entitled to a presumption of validity. Grabowsky v. Twp. of Montclair, 221 N.J. 536, 551 (2015). Municipalities, however, derive their power from the State and, thus, can exercise only such power as they are granted by the Legislature and the State Constitution. Varsolona v. Breen Capital Servs. Corp., 180 N.J. 605, 624-25 (2004). Consequently, the presumption of validity can be overcome if the municipal ordinance exceeds its delegated authority under the governing statute. See 388 Route 22 Readington, supra, 221 N.J. at 339-40. Accordingly, the question here is whether Riverdale has the authority to charge a non-user fee in connection with the reservation of sewage capacity.
New Jersey has several statutes that authorize municipalities and counties to operate sewage systems: the Municipal and County Sewerage Act (MCSA) N.J.S.A. 40A:26A-1 to -22; the Municipal and County Utilities Authorities Law (MCUAL), N.J.S.A. 40:14B-1 to -78; and the Sewerage Authorities Law (SAL), N.J.S.A. 40:14A-1 to -45. Each of these statutes authorizes municipalities and counties to provide sewage services to their residences under different schemes. The power to charge for sewage services under each statute is almost identical. See N.J.S.A. 40A:26A-10, -11; N.J.S.A. 40:14A-8; N.J.S.A. 40:14B-22.
Riverdale is a non-member of the Sewerage Authority. Accordingly, the MCSA governs Riverdale's authority to establish fees for sewage services. The MCSA authorizes municipalities "to finance, acquire, construct, maintain, operate or improve works for the collection, treatment, transport and disposal of sewage and to provide for the financing of [sewage] facilities." N.J.S.A. 40A:26A-2. Pursuant to the MCSA, a municipality may charge two types of fees: (1) sewage service charges, N.J.S.A. 40A:26A-10, and (2) connection fees, N.J.S.A. 40A:26A-11. Sewage service charges, which are also referenced as "rates or rentals," can "be charged to users of sewerage services." N.J.S.A. 40A:26A-10. A connection fee is "a separate charge in the nature of a connection fee or tapping fee for each connection of any property to the sewerage system." N.J.S.A. 40A:26A-11. The connection fee "shall not exceed the actual cost of the physical connection plus an amount representing a fair payment towards the cost of the system." Ibid.
In construing SAL and MCUAL, the Supreme Court and this court have consistently held that a municipality is not authorized to charge annual sewage fees on unimproved property that is not using the sewage system. See In re Passaic Cty. Utils. Auth., 164 N.J. 270, 300-01 (2000) (finding that both SAL and MCUAL restrict imposition of service charges to users); Airwick Indus. v. Carlstadt Sewerage Auth., 57 N.J. 107, 121 (1970) (finding that SAL "does not authorize a special assessment or any immediate charge against a non-user"), cert. denied, 402 U.S. 967, 91 S. Ct. 1666, 29 L. Ed. 2d 132 (1971); Hamilton Twp. Mun. Utils. Auth. v. Apple Tree Corp., 202 N.J. Super. 440, 446 (App. Div.) (holding that an annual sewerage service charge for reserved capacity on unimproved property is beyond the power granted by MCUAL), certif. denied, 102 N.J. 32 7 (1985); Ivan v. Marlboro Twp. Mun. Utils. Auth., 162 N.J. Super. 466, 468 (App. Div. 1978) ("[N]onusers of the system cannot be compelled to pay a minimum fee based on operating costs and expenses as well as debt service without contracting for the use of the system.").
While no case has previously directly addressed the question of whether a non-user sewerage fee can be charged under the MCSA, the language in the MCSA authorizing charges is similar to the language in SAL and MCUAL. Compare N.J.S.A. 40A:26A-10, -11, with N.J.S.A. 40:14A-8, and N.J.S.A. 40:14B-22. Consequently, we hold that MCSA also does not authorize an annual charge on unimproved property that is not using the sewerage system.
Here, Riverdale's Non-user Ordinance § 136-19 D(2) provides:
Following the purchase of sewage capacity, the party reserving capacity shall pay annual nonuser fees as follows:
Because the Non-user Ordinance is an annual sewerage charge on unimproved property that is not currently using the sewerage system, it is ultra vires, without any legal force or effect. Accordingly, we affirm the trial court's decision that the Non-user Ordinance is ultra vires.a. If less than 300 gallons per day of allocation has been reserved, an amount of $4 00 per year;
b. If greater than 300 gallons per day of allocation has been reserved, an amount of $1.95 per gallon of reserved allocation per year.
C.
We now turn to the question of whether Paige is entitled to a refund of the non-user fees it paid to Riverdale pursuant to the Non-user Ordinance. Paige paid Riverdale an annual non-user fee of $9600. Paige contends it is due $98,400, plus interest, for fees it paid quarterly from 1998 to 2008. Riverdale, in opposition, argues that the refund should be denied by the volunteer rule, laches or waiver. The trial court held that Paige was barred from receiving a recovery under the volunteer rule. We review the trial court's ruling on a de novo basis because it is a question of law which the court applied on summary judgment. See Ross v. Lowitz, 222 N.J. 494, 503-04 (2015).
Generally, "when a tax already collected is set aside by judicial decision, the law raises an assumption to refund the money which can no longer be honestly retained." N.J. Hosp. Ass'n v. Fishman, 283 N.J. Super. 253, 264 (App. Div. 1995) (citing Cont'l Trailways v. Dir., Div. of Motor Vehicles, 102 N.J. 526, 549 (1986), cert. dismissed, 481 U.S. 1001, 107 S. Ct. 1636, 95 L. Ed. 2d 195 (1987)). That assumption of a refund is premised on the common law principles of restitution. In re Fees of State Bd. of Dentistry, 84 N.J. 582, 587 (1980).
There is, however, a well-established exception to the assumption of a refund of a payment made to a governmental entity. That exception is known as the "volunteer rule." Id. at 588. The volunteer rule "provides that 'where a party, without mistake of fact, or fraud, duress or extortion, voluntarily pays money on a demand which is not enforceable against him [or her], he [or she] cannot recover it back.'" Ibid. (quoting City of Camden v. Green, 54 N.J.L. 591, 593 (E. & A. 1892)).
The volunteer rule has been a part of New Jersey jurisprudence for over one hundred years. See City of Camden, supra, 54 N.J.L. at 593. Our Supreme Court has consistently reaffirmed and applied the rule. See, e.g., Cont'l Trailways, supra, 102 N.J. at 548; In re Fees, supra, 84 N.J. at 588; N.J. Builders Ass'n v. Borough of Mendham, 263 N.J. Super. 88, 95 (App. Div. 1993); Squires Gate, Inc. v. Cty. of Monmouth, 247 N.J. Super. 1, 10 (App. Div. 1991); Yardville Estates, Inc. v. Trenton, 66 N.J. Super. 51, 62 (App. Div. 1961).
In Continental Trailways, the Supreme Court refused to provide a refund of a tax paid even where the law was held unconstitutional. The Supreme Court explained "in the absence of statutory authority, taxes voluntarily, although erroneously, paid . . . cannot be refunded." Cont'l Trailways, supra, 102 N.J. at 548. The Court also explained the public policy underlying the volunteer rule discourages suits for the refund of taxes erroneously paid or illegally collected. Ibid. The rationale for the rule is that "government[al] budgets are prepared on an annual cash basis" and governments should be able to rely on the presumptive validity of statutes and ordinances in planning government budgets. Ibid.; see Lavin v. Hackensack Bd. of Ed., 90 N.J. 145, 154 (1982).
The refund of monies improperly collected by a government entity turns primarily on whether the payment was made under duress and without protest. In re Fees, supra, 84 N.J. at 588. Accordingly, in In re Fees of State Board of Dentistry, our Supreme Court found that the volunteer rule did not apply because the fees at issue were paid under duress. The case concerned the interpretation of a statute that granted the Board of Dentistry the power to promulgate rules setting the "charges for examinations, licensures and other services." Id. at 584. The Board was given authority to impose fees necessary to defray its expenses. Promptly after the fee schedule was enacted, the New Jersey Dental Association challenged the fees as excessive. The Supreme Court found the dentists "had no choice but to pay the registration fee if they were to continue to practice their profession legally." Id. at 589. In addition, the Court placed special emphasis on the fact that the dentists promptly challenged the fees after the enactment of the fee schedule. If, in contrast, a payor fails to protest, "the payor may not successfully claim duress as the reason it failed to protest." Builders Ass'n, supra, 263 N.J. Super. at 95; see Squires Gate, supra, 247 N.J. Super. at 10-12.
Here, the record establishes that Paige paid the non-user fees without protest and without duress. Paige voluntarily sought to reserve sewerage capacity to enhance the marketability of its property. There was nothing compelling Paige to reserve such sewerage capacity; Paige was always free to sell its reserved capacity back to Riverdale and stop paying the non-user fee. Borough of Riverdale, N.J., Sewer Ordinance § 136-19 D(4).
Paige contends that it did not voluntarily pay the non-user fee; rather, it was forced to do so to avoid the consequences of non-payment under the ordinance. Although the Borough's payment notices to the landowners included language warning that a lien would be placed on the property if the non-user fee was not paid, there is no evidence in the record that Riverdale ever took any action to compel payment of the non-user fee, including encumbering the title of the property by placing a municipal lien. Moreover, Paige was dealing with a public body. If Paige believed it was paying under duress, it had the right to bring an action in lieu of prerogative writs. See Yardville Estates, supra, 66 N.J. Super. at 63 ("[I]t is essential before duress is found that the complainant be compelled to accede by wrongful pressures." (quoting Woodside Homes, Inc. v. Town of Morristown, 26 N.J. 529, 543 (1958))).
Paige also argues that it did not know that the non-user fee was illegal until it consulted with lawyers in 2008. A mistake of law, however, is not a shield to the volunteer rule. See In re Fees, supra, 84 N.J. at 588 (finding that a mistake of law by one who voluntarily pays a tax does not provide a ground for recovery).
In short, the facts in this case establish that the volunteer rule applies and, therefore, Paige is not entitled to a refund. Because we affirm the entry of summary judgment on the application of the volunteer rule, we need not discuss laches or waiver.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION