Commercial Bank v. City of Rochester

James 0. Smith, J.

It appears by the allegations in the complaint, that the money which the plaintiffs seek to recover back in this-action was paid by them with full knowledge of all the facts upon which their present claim is based, and that they acted under no constraint, compulsion or duress. It is a familiar doctrine that, in general, money paid in such circumstances can not he recalled.

The plaintiffs do not controvert the general rule above stated, but they insist that the defendants are precluded from objecting that the payment in question was voluntary, by reason of the terms of a resolution adopted by their common council, on the faith of which the plaintiffs allege the- payment was made. The resolution is in these words: “ Resolved, that-in case the Commercial Bank shall pay its tax and assessment at any time prior to the issuing of a warrant for the collection thereof, such payment, shall not be treated or regarded as a voluntary payment, but as a payment under protest, and after the issuing of such warrant and a levy upon its property to enforce such payment.” If there were no question as to the power of the common council to bind the coloration, by the resolution referred to, I should have no difficulty in assenting to the plaintiffs’ position. The rule that a voluntary payment can not be recovered back is intended solely for the protection of the party receiving the money, and it is undoubtedly competent for him to waive the benefit of the rule by a valid agreement to that effect. In Brisbane v. Dacres, (5 Taunt. 143,) Gibbs, J. said: “ There are many doubtful questions of law; when they arise, the defendant has an option, either to litigate the question, or to submit to the demand, and pay the.- money. : I think that by submitting to the demand, he that pays the money gives it to the person to whom he pays it, and makes it his, and closes the transaction between them. He who receives it has a right to consider it as his without dispute ; he spends it in confidence that it is his;,and.it would..be most mischievous and unjust if he who has acquiesced in the right by such v’óluútárv payment should be at liberty, at any time within the statute of limitations,6 to rip up the matter, and recover back the money. He who received it is not in the same condition; he has spent it in the confidence it was his, and perhaps has no means of repayment.” In the case in which the foregoing remarks were delivered the payment was made without protest; but the rule is also applicable to those cases in which a part}--, with full knowledge of all the facts, voluntarily pays money in satisfaction or discharge of a demand unjustly made on him, even though he should protest, at the time of such payment, that he was not legally bound to pay the same. The Boston and Sandwich Glass Co. v. The City of Boston, (4 Metc. 381,) was a case of that nature. Dewey, J. giving the opinion of the court, said: “The reason of the rule, and its propriety, are quite obvious, when applied to a case of payment upon a mere demand of money, unaccompanied with any power or authority to enforce such demand, except by a suit at law. In such case, if the party would resist an unjust demand, he must do so at the threshold. The parties treat with each other on equal terms, and if litigation is intended by the party of whom the money is demanded, it should precede payment. If it were not so, the effect would be to leave the party who pays the money the privilege of selecting his own time and convenience for litigation; delaying it, as the case may be, until the evidence, which the other party would have relied upon to sustain his claim, may be lost by lapse of time and the various casualties to which human affairs are exposed.”

These considerations show the value of the rule to the party receiving the money. They also suggest, in the case at bar, the importance of the question whether the common council had authority to make the agreement expressed in the resolution above transcribed. The resolution shows, on its face, that the payment was not compulsory in fact, and its express purpose was to waive the rule under consideration and subject the corporation to the mischiefs which the rule is designed to prevent. I cannot resist the conclusion that by their action in that respect the common council exceeded their "rightful powers.

(1.) It is obvious that the inconveniences which would result from allowing voluntary payments to be recovered back, may be much more serious and hurtful in the case of a municipal corporation than in that of an individual, especially when, as in this case, the money soúght to be recovered was received by the corporation in payment of a tax. The corporation must necessarily expend all the moneys received by tax during the same fiscal year in which they are received, and if afterwards called on to refund, it can only do so by imposing a new tax to raise money for the purpose. Assuming that such tax would be legal, it might work great injustice to individual tax payers, by falling on those who were not residents or property holders within the limits of the corporation when the moneys to be refunded were received and expended. And, on the other hand, as the party demanding the money of the corporation could choose his own time of doing so, and consequently of making the new tax necessary, he might delay till he had ceased to be a tax payer, and thus escape his share of the deficiency in the original tax. It seems to me clear that in the case before us, neither the common council nor the corporation whose agents they were, had authority to enter into an agreement which might work consequences so unjust to the individual tax payers of the city.

(2.) It is no answer to the position above stated,.to say that the same consequences might have resulted if the tax, instead of being paid voluntarily by the plaintiffs, had ■ been collected by compulsory process of law. By the charter of the city, the power of collecting and receiving taxes is vested, not in the common council, but exclusively in the city treasurer, and collectors appointed by him. (Laws of 1850, cJi. 262, §§ 282, 106.) The treasurer is chosen by the electors of the corporation, (§ 9,) and the common council are expressly prohibited from appointing any other person to receive taxes, (§ 106.) The mode in which taxes shall be collected, when not paid voluntarily, is specifically pointed out, in the charter. The common council have no duties or powers in connection therewith, except to cause the assessment roll with warrants annexed to he delivered to the treasurer. All proceedings thereunder are to be taken by that officer and his appointees. (Charter, §§ 108 to 121; Laws of 1858, ch. 80, p. 158, §§ 5, 6, 7.) If the common council had the power to collect, they could not exercise it in any other mode than that prescribed by statute. (5 Barb. 613. 2 Bosw. 173. 20 N. Y. Rep. 312.) The mode of collection prescribed by the charter is uniform. But if the resolution in question is upheld, what shall prevent the common council from making a special agreement with any other tax payer, on such terms as they think proper, to induce him to pay his tax before the compulsory process provided by the charter can be resorted to P Such a power in their hands would open a wide door for favoritism and corruption.

(3.) By the resolution in question, the common council, in order to induce a tax payer to pay his tax voluntarily, surrendered, as we have seen, a valuable right of the city. If - they had gone a step further and bartered away the money of the city, as for instance, if they had agreed to allow interest, or to make a deduction from the amount of the tax, in consideration of its payment in advance of the issuing of a warrant for its collection, no argument would be needed to show the utter invalidity of their action. But upon the question of power I do not ¡perceive that the case is altered by the circumstance that the thing bartered away is a legal right, instead of money or a chattel.

The only part of the charter to which the plaintiff has called our attention, upon the question of authority, is section 48, which provides that the common council “shall have the management and- control of the finances, rights and interests, buildings and all property, real and personal, belonging to the city, and may make such rules and by-laws relating to the same, as they shall deem proper and necessaiy.” This general provision does not confer upon the common council power to annul or disregard the special provisions of the charter, already adverted to, in respect to the collection and receipt of taxes.

The resolution of the common council being unauthorized, the payment must be regarded as voluntary. Those who deal with the agents of a municipal corporation must take notice of the restrictions in its charter, in respect to the powers of the corporation and its agents, and the mode in which such powers may be exercised, and must see to it that the contracts on which they rely are authorized by the charter. (Brady v. Mayor &c., 20 N. Y. Rep. 312.) The plaintiffs are presumed, in law, to have known when they paid the money voluntarily, that the agreement which they now set up was void.

As the common council assumed to incur an obligation which even the corporation was not authorized to do by agreement, the corporation is not made liable by the fact that it has received the consideration for the obligation. A corporation can not, by subsequent ratification, make good an act of an agent which it could not have distinctly empowered. (Hodges v. Buffalo, 2 Denio, 110. Halstead v. The Mayor &c., 3 N. Y. Rep. 430.) But, in fact, the question of ratification does not arise. The agreement being void, to the knowledge of the plaintiffs, the case is the same as if the payment had been made without the agreement. The defendants are exempt from liability for the reason that the payment was voluntary in fact, and there is no sound legal principle upon which it can be otherwise treated. •

For the reasons above expressed, I think the judgment below should be reversed, and judgment entered for the defendants, on the demurrer.

Welles, J. concurred.