Leffingwell v. Scutt

Van Kirk, J. This is a taxpayer’s action under section 51 of the General Municipal Law to restrain any further payment on an illegal contract and to recover into the village treasury money already paid thereon. The defendants are the village of Watkins, its trustees and treasurer, and Barrows, Reeves and Pollard, doing business under the firm name of Ellsworth, Barrows & Reeves. The trustees of the village passed a resolution to employ the defendants Barrows, Reeves and Pollard, whom we shall call the “ firm,” to make “ a blanket assessment for the board of assessors ” and to pay them therefor two-tenths of one per cent of the assessment. The services were performed by the firm and part payment has been made. The trustees are a body of limited powers. Their powers are given'them by statute. The contract here in review is not authorized by any statute and is an illegal contract. The village is not liable upon a contract not authorized by law. (Village Law, § 333, as amd. by Laws of 1914, chap. 274.) To pay village money upon an illegal contract is an illegal official act. Section 51 (supra) authorizes a taxpayer to maintain an action against all officers, agents, commissioners and other persons, acting or who have acted for and on behalf of any village in this State, “ to prevent any illegal official act ” by those officers, agents or other persons. This action, therefore, may be maintained to restrain further payments upon this illegal contract. The action may be maintained also to recover into the village .treasury the moneys which have already been paid upon this contract. Moneys belonging to a municipality which have been paid out by an officer who had no authority to make the payment iray be recovered by the municipality from the person receiving it. (People v. Fields, 58 N. Y. 491.) In that case (p. 505) the court, after stating that the record did not disclose fraud or collusion, said: “ An action may be maintained on other grounds. The payment was made and received without any lawful power in the Comptroller to make it. The defendant is chargeable with knowledge of this. It was a payment by an agent, who had no authority as such, to make it. It was, then, no payment by the principal in mistake of law or ignorance of facts. The principal, in legal view, had no part in the payment, and it was made against its will. It was equivalent to an appropriation by the appellant of the moneys to his own use, with the acquiescence and help of the officer [465] of the city, who was authorized to pay them out not otherwise than in accordance with law. He having made the payment unlawfully, it was an act not within the scope of his agency and does not bind his principal. [Citing authorities.] There is, for these reasons, a right of action somewhere, against the appellant, to recover the whole or a part of these moneys.” And in a like case (Village of Fort Edward v. Fish, 156 N. Y. 363, 373) it is said: “ The doctrine of voluntary payment cannot be invoked by the defendant to enable him to retain the money of the plaintiff that was illegally paid to him. That doctrine applies to individuals who have power to do as they wish with their own, but it does not apply to an agent of a municipal corporation, who pays out its money without power, to one who accepts it with knowledge.” Such “ right of action ” is in a taxpayer under section 51, which provides for an action “ to prevent waste or injury to, or to restore and make good,” property and funds of a municipality. Payment of money upon an illegal claim occasions waste. (Ayers v. Lawrence, 59 N. Y. 192; Trumbull v. Palmer, 104 App. Div. 51.) In case the waste or injury complained of consists in any board, officer or agent, “ by collusion or otherwise,” paying any illegal claims against such village, “ the court may, in its discretion, prohibit the payment or collection of any such” claims, demands, expenses or judgments, in whole or in part, and shall enforce the restitution and recovery thereof, if heretofore or hereafter paid, collected or retained by the person or party heretofore or hereafter receiving or retaining the same.” The words “ collusion or otherwise ” are not to be construed as limiting the right to recover funds to those payments which are tainted with active, willful collusion or something akin thereto in addition to illegality. A distinction is to be made, in respect to active collusion, between acts of municipal officers which are within jurisdiction and those which are without it; if within jurisdiction, then actual collusion must be shown before recovery may be had. But the fact that the payment is illegal, is beyond the power of the board or official to make, is sufficient to support the action. Both parties to the transaction are bound to know the limitation upon the use of the funds of the municipality and they cannot innocently use them otherwise. (Parr v. Village of Greenbush, 72 N. Y. 463, 471, 472; Lyddy v. Long Island City, 104 id. 218, 223.) To pay and to receive payment on an illegal claim brings the case within the statute. In Smith v. Hedges (223 N. Y. 176) it was held that a taxpayer’s action could be maintained to recover moneys paid to a supervisor upon an illegal contract “ whether such an audit is branded as fraudulent or as without jurisdiction. It is illegal with either brand.” (Stetler [466] v. McFarlane, 230 N. Y. 400, 405.) All moneys recovered in such an action are for the village treasury. The members of the defendant firm are necessary parties, because recovery may be had from them. (Osterhoudt v. Board of Supervisors of Ulster County, 98 N. Y. 239.) The taxpayer’s action was intended to protect and secure the rights of the village and it was intended that therein a taxpayer could recover for the treasury moneys which had been wrongfully paid out in those cases in which the village might in its own name recover; the intent was to “ give the taxpayer a concurrent action with the corporation for the prevention or correction of the wrongs mentioned in it.” (Ayers v. Lawrence, 59 N. Y. 192; Queens County Water Co. v. Monroe, 83 App. Div. 105.) Those officers who had participated in the illegal acts might be slow to prosecute on behalf of the municipality. It may be true that the services which the .firm has rendered the village of Watkins are desirable and have been beneficial. If so it cannot affect the result here; the authority to contract for such services must come from the Legislature, not from the courts. Though services have been rendered and the village has received benefit therefrom there is no implied obligation to pay therefor. (Parr v. Village of Greenbush, 72 N. Y. 463, 472.) The comment of Judge Vann in Village of Fort Edward v. Fish (supra) is still wholesome: “ It is a matter of grave public concern to protect municipal corporations from the unauthorized and illegal acts of their agents in wasting the funds of the taxpayers. It is only with the utmost difficulty that municipal officers and agents can be kept within the bounds of their authority now, but once let it go forth as the settled law of the State that an illegal contract can become the basis of a lawful compromise, entered into between the contractor and an .agent guilty of the illegal action, and a new door will be opened to municipal spoliation.” The judgment should be reversed and judgment rendered in favor of plaintiff, adjudging that the contract with the defendants Barrows, Reeves and Pollard is illegal and void and restraining the defendants, members of the board of trustees of the village of Watkins and the president and treasurer of said village, from paying any funds of the village to the defendants Barrows, Reeves and Pollard, in consideration of services performed under said alleged contract, and restraining said Barrows, Reeves and Pollard from receiving any village funds in payment upon said contract; also adjudging that the plaintiff recover of the defendants Barrows, Reeves and Pollard the sum of $1,943.38, with interest, from June 24, 1924, with costs. [467] We disapprove of findings of fact numbered 16, 18 and 19 and all findings of fact included in the conclusions of law. We make the findings as found by the trial court at the request of the plaintiff; also that the defendants Barrows, Reeves and Pollard demand payment of the balance due for services under the alleged contract and that payment thereof will be made unless restrained by the court; that plaintiff is entitled to judgment accordingly. McCann, J., concurs; Cochrane, P. J., concurs with Van Kirk, J., that an injunction should issue, but votes against a recovery of the money heretofore paid on the ground that such recovery in this action is not authorized by section 51 of the General Municipal Law, and on the authority of Stetler v. McFarlane (230 N. Y. 400); Daly v. Haight (170 App. Div. 469; affd., 224 N. Y. 726), and Wallace v. Jones (195 id. 511); Davis, J., dissents, with an opinion, in which Hinman, J., concurs.