People of State of N.Y. v. . Dennison

Rapallo, J. The General Term held, upon the. appeal from the judgment, that this action was founded upon the allegation of fraud, and reversed the j udgment and granted a new trial on the ground, among others, that the plaintiff, having failed to establish the fraud alleged, could not maintain the action on the theory that a liability founded on contract was disclosed by the evidence. That decision was affirmed by this court, * and it was distinctly held by us that this was an action for a tort, and not upon contract. It was consequently an action in which a counter-claim founded on contract could not properly have been allowed. (Smith v. Hall, 67 N. Y. 48 ; Code, § 150; Pattison v. Richards, 22 Barb. 143.) The claim of the defendants was a cause of action, not arising out of the transaction set forth in the complaint as the foundation of the plaintiff’s claim, or connected with the subject of the action. The subject of the action was a fraud alleged to have been committed by the defendants upon the plaintiff, the allegation being that the defendants fraudulently obtained money from the State by means of false-repre-, *280 sentations, false vouchers and collusion with State officers. The counter-claim was that the State was indebted to the defendants on contract for work and materials which had not •been paid for. The circumstance that the work in respect to which the fraudulent representations charged were alleged to have been made, was the same for which the defendants claimed that an indebtedness existed in their favor, does not bring the case within section 150 of the Code. The subject of this action, which was the fraud, was wholly distinct from the claim set up by the defendants for money due on the contract for the work. Nor has section 150 been regarded as conferring the right to set up a counter-claim founded on contract, in an action of tort. The judgment having been reversed on the ground of the failure of the plaintiff’s case, the counter-claim has not been adjudicated upon in any form, nor was its validity passed upon or involved in the decisions rendered on the appeals; nor, for the reasons stated, could it have been considered if the plaintiff had gone to a new trial. The fundamental objection to the counter-claim was not waived or cured by the reply. (Smith v. Hall, 67 N. Y. 48.) The ground already stated is sufficient to sustain the order appealed from. But behind and beyond that, lies the further insuperable objection to the recovery claimed, that the court had no power to render an affirmative judgment against the State. This point has been so fully covered by the opinion of Westbrook, J., at Special Term, that it is not necessary to review in detail the authorities upon the subject and the points so ably and forcibly pressed upon the court by the learned counsel for the appellants. We shall, therefore, do little more than state our conclusions. The position that a State or sovereign, by coming into court as a suitor, abandons its sovereignty and subjects itself to any affirmative judgment which the court may render against it upon a set-off or counter-claim cannot be maintained. It is opposed to all the authorities, and the principle upon which they are founded, and the dicta of learned judges which have been cited in its support, though maintaining the right of *281 set-off, do not necessarily go to the extent claimed, of asserting that an affirmative judgment may be rendered against the government for any balance found due from it. While the government may, through its courts, enforce its claims against its citizens, this right is not reciprocal. A set-off is in the nature of a cross-action, and the government cannot be sued except by its own express permission. This is a universal principle applicable to every sovereignty, and often recognized in the courts of the United States. The right of a debtor of the United States government, when sued by it, to interpose a counter-claim or counter-credit, even to the extent necessary to protect himself against the claim of the government, is conceded in all the cases to rest upon the provisions of the act of March 3, 1797 (§§ 3 and 4), 'which require that such counter-credits be first submitted to the proper accounting officers. They can only be set up in court after having been disallowed by such officers, except in special cases”. It was supposed at one time that this statute authorized the court to render judgment against the government for any (balance found due the defendant, and there are some instances of judgments of Circuit Courts to that effect. (U. S. v. Bank of Metropolis, 15 Pet. 377.) But this doctrine was not sustained by the Supreme Court. A defendant sued by the government may, under the statute referred to, and on complying with its conditions, give in evidence any counter-claim or credit he may have in his own right, and which is a proper subject of set-off, whether arising out of the transaction on which he is sued or an independent transaction ( U. S. v. Wilkins, 6 Wheat. 135), but it is now well settled that such counter-claim is available only to the extent necessary to defeat the claim of the government, and that no judgment can be recovered against the government for the excess, should there be any. (Reeside v. Sec. of Treas., 11 How. 272; De Groot v. U. S., 5 Wall. 431; U. S. v. Eckford, 6 id. 484.) Ho action can be sustained against the government except by its own express consent, under some special statute allowing it (11 How. 290), and to permit a demand set up by way of counter-claim *282 against the government' to be proceeded upon tó judgment against it, would be equivalent to permitting a suit to be prosecuted against it. (Id.) Authority to render a judgment against the State or government, in one of its own courts, cannot be implied but must be express, nor can it be claimed under general laws in which the State is not named. (19 Wall. 239.) The learned counsel relies upon 2 Revised Statutes, 552, 553, section 13, as conferring authority to render the judgment in question. That provision is as follows: “ Every suit or proceeding in a civil case instituted in the name of the State, by any public officer duly authorized for that purpose, shall be subject to all the provisions of law respecting similar suits and proceedings, when instituted by or in the name of any citizen, except where provision is or shall be otherwise expressly made by statute; and in all such suits and .proceedings the people of this State shall be liable to be nonsuited and to have judgments of non pros, or discontinuance entered against them in the same cases, withjike manner, and with the same effect, as in suits brought by citizens, except that no execution shall issue therein.” The first branch of this section, which in general terms subjects suits brought by the State to all provisions of law respecting similar suits brought by a citizen, would, we think, even if standing alone, be insufficient to confer authority to render an affirmative judgment against the State upon a counter-claim or set-off. If such effect had been intended, it would have been specifically declared, and the machinery for paying such judgments would have been provided. But that it was not so intended is made clear by the subsequent express grant of power to render certain judgments, such as “nonpros.” “ discontinuance,” etc. It seems to have been deemed necessary to enumerate these judgments, as they empower the defendant to take affirmative steps against the State to turn it out of court on account of its own loches. It cannot be supposed that if it had been intended to confer upon the courts the power of rendering affirmative judgments against the State,. *283 founded upon set-offs or counter-claims, the legislature would have failed to enumerate that novel and extraordinary power, while taking pains to mention those of so much minor importance. The stipulation given by the attorney-general, on taking the appeal to this court, is relied upon as some sort of an assent to the judgment in question. We cannot so construe it. It was a stipulation which the law compelled him to give, to enable him to take the appeal to this court from the order granting a new trial, and its form was, that in case the new trial should be denied, judgment absolute might be rendered against the appellants. This stipulation waived no legal objection which might exist to the counter-claim, and no immunity of the State from an affirmative judgment against it. It authorized the court to render only such judgment as it was justified bylaw in rendering, and had had power to pronounce. It simply waived a new trial and rested the plaintiff’s case upon the question whether the judgment of the referee should be sustained, or whether it was properly reversed by the General Term. If the reversal was sustained, it was made absolute, and ended the case so far as the right of the plaintiff was concerned. The question of the right of the defendants to go further, and obtain judgment on their counter-claim against the' State, was left for the court to determine, and was not affected by the stipulation. The counsel for the appellants further contends that the counter-claim, having been put in issue in this action, will be barred if the judgment below is not sustained. We do not think any such result can follow. What we decide is that the defendants’ demand for the balance claimed to be due them for work done under their contract, was not a proper subject of counter-claim in this action. It was, therefore, not properly in issue therein. It has never been tried or adjudicated upon, and if it had, the court had no power to render judgment thereon against the State. Another mode of redress is provided by statute in such cases, and if the defendants have any just claim against the State they must apply for relief to the board of *284 audit, the tribunal instituted by the State for passing upon such claims. As their claim was not triable or recoverable in this action, the judgment rendered herein does not conclude the defendants in respect thereto. The order should he affirmed, with costs. All concur. Order affirmed. Footnotes [*] 80 N. Y. 656.