Smith v. . Hedges , 223 N.Y. 176 ( 1918 )

I am unable to concur in the reversal of this judgment.

The defendant by a false voucher supported by a false affidavit procured the audit and allowance of his claim. His only excuse is that he did not wish to deceive, but misunderstood the law. We are about to hold that the excuse is a good one; that there is no way to get the money back if the supervisors were misled; that concealment of the truth has conferred a jurisdiction which disclosure would have destroyed; and that a claimant whose misrepresentation has induced an audit, may invoke it as a bar. Only some overmastering principle or precedent could justify that conclusion. I do not think they can be found.

The cases say that to nullify an audit in an independent action at the instance either of the people or of a taxpayer, there must be something more than error. There must be fraud or lack of jurisdiction (Osterhoudt v. Rigney, 98 N.Y. 222; People v.Sutherland, 207 N.Y. 22). But the fraud which will be sufficient for that purpose has never been defined; there has been no occasion to distinguish between willful and innocent misstatements. General rulings abound that when fraud is shown, the audit falls (People v. Wood, 121 N.Y. 522, 529; Nelson v. Mayor, etc., of N.Y., 131 N.Y. 4). The presentation of false and excessive vouchers has been spoken of as equivalent to fraud (People v. Wood, supra; Hicks v. Eggleston, 105 App. Div. 73). The audit has been declared void though the auditing officer was innocent, and the claimant alone guilty (Hicks v. Eggleston, supra). But beyond that, there has been neither attempt nor occasion to define the limits of relief. Courts do not weary of cautioning counsel to distinguish dictum from decision. They must heed their own warnings.

In this case, the findings say that there was no fraud or collusion. Misrepresentation, though innocent, there was. The defendant misstated the number of lines copied and extended. He has been acquitted of willful wrong. He misconceived his rights. He attempted in good faith to apply a ruling of a high court which seemed, not without show of reason, to justify his count. His purpose was innocent, but his affidavit was false. That is a fair construction of the findings when we read them as a whole. What controls is the defendant's conduct, and not the epithets attached to it (Coleman v. Burr, 93 N.Y. 17, 31).

I think that misrepresentation, whether willful or unwitting, vitiates the audit. A claimant cannot procure through false statements the allowance of his claim, and then interpose the allowance as a bar to restitution. There may not have been that reckless indifference to error or that pretense of exact knowledge which will sustain an action for deceit (Hadcock v.Osmer, 153 N.Y. 604; Kountze v. Kennedy, 147 N.Y. 124). But imposition of less degree has many of the consequences of fraud, and in equity at least is often loosely spoken of as fraud (Hammond v. Pennock, 61 N.Y. 145, 152; Nocton v.Ashburton, 1914, A.C. 932, 954). There is a distinction between the wrong that justifies rescission and the wrong that leads to an award of damages (Hammond v. Pennock, supra; Carr v. Nat.B. L. Co. of Watertown, 167 N.Y. 375, 379). Innocent misrepresentations, if they induce a contract, are ground for setting it aside (Bloomquist v. Farson, 222 N.Y. 375; Canadian Agency, Ltd., v. Assets Realization Co., 165 App. Div. 96, 102, collating all the cases). I think a like effect follows when they induce the audit and allowance of a claim upon the public treasury. At least that must be so when disclosure of the truth would prove the claim illegal and take from the auditing body jurisdiction to allow it.

People ex rel. Smith v. Clarke (174 N.Y. 259) holds nothing to the contrary. In that case there was evidence that the board of supervisors had erred; there was no evidence that misstatements of the claimant had brought about the error. A different situation is before us here. There is here no attempt to convict the board of error. The claimant's affidavits were sufficient on their face. They did not show the method of computation; they gave the totals, and nothing else. The members of the board were under no duty to count for themselves a million lines or more. They might lawfully accept the affidavit of one who had made the count (County Law, sec. 24), just as a court in determining a like question might accept the testimony of a witness. The record makes it certain that this is what they did. I agree that disclosure of the truth would have destroyed their jurisdiction (People v. Sutherland, supra; Bd. of Supervisors,Richmond Co. v. Ellis, 59 N.Y. 620; Lyddy v. L.I. City,104 N.Y. 218; People v. Journal Co., 213 N.Y. 1; Wadsworth v. Bd. of Supervisors, Livingston Co., 217 N.Y. 484). But there is no need of another trial. The defendant is in this dilemma: either the board had knowledge or it had not. If it had knowledge, allowance was beyond its power. If it had no knowledge, it was misled. The award would have been voidable if the truth had been disclosed. The remedy cannot be cut off by filing a false statement through which disclosure is avoided.

I dissent from the ruling that a misrepresentation, which misleads, confirms and sanctifies an audit. I am unwilling to believe that there is then no power in the courts to extricate the county from the tangle in which the claimant has involved it by a false affidavit. While the broad statutes authorizing suits by taxpayers (Gen. Mun. Law, sec. 51) and by the People (Code Civ. Pro. sec. 1969) remain upon the books, I cannot vote to commit our law to so impotent a conclusion. The scope of the taxpayer's action has steadily expanded (Altschul v. Ludwig,216 N.Y. 459). This case is fairly within its purpose. We must not limit the just effectiveness of the remedy by any narrow construction. The defendant may have been innocent when he induced the board to act. He is not innocent to-day when he takes advantage of his own wrong and clings to payments won through his suppression of the truth (Redgrave v. Hurd, L.R. 20 Ch. D. 1, 12, 13). Of such conduct we are now asked to say that, within the purview of these statutes, it is neither a waste of public funds nor a fraud on public rights. We have never said so yet. We should not say so now.

The judgment should be modified by deducting the payments made for copying the headings of the assessment rolls, which, I think, were proper charges, and as modified affirmed.

HISCOCK, Ch. J., COLLIN and CUDDEBACK, JJ., concur with POUND, J.; CARDOZO, J., reads dissenting opinion, and HOGAN and ANDREWS, JJ., concur.

Judgment reversed, etc.