Adrico Realty Corp. v. City of New York

• Decision Date: 31 December 1928
• Citation: 164 N.E. 732,250 N.Y. 29
• Parties: ADRICO REALTY CORPORATION v. CITY OF NEW YORK.
• Court: New York Court of Appeals Court of Appeals

250 N.Y. 29

164 N.E. 732

ADRICO REALTY CORPORATION

v.CITY OF NEW YORK.

Court of Appeals of New York.

Dec. 31, 1928.

Action by the Adrico Realty Corporation against the City of New York. From a judgment of the Appellate Division (222 App. Div. 655, 224 N. Y. S. 742), affirming a judgment of nonsuit dismissing the complaint, plaintiff appeals by permission of the Court of Appeals.

Reversed, and new trial granted.

Pound, J., dissenting.

Appeal from Supreme Court, Appellate Division, First Department.

John L. Wilkie and M. S. Lockhart, both of New York City, for appellant.

George P. Nicholson, Corp. Counsel, of New York City (Vine H. Smith, Matthew J. Troy, and J. Joseph Lilly, all of New York City, of counsel), for respondent.

CRANE, J.

This appeal brings once more before this court the law of voluntary payments. The principle is well established that a voluntary payment of a tax made under a mistake of law, but with a full knowledge of all the facts, cannot be recovered. Cooley, Taxation, vol. 3, § 1282; 48 A. L. R. Anno. p. 1382. This court, in Matter of Trustees of Village of Delhi, 201 N. Y. 408, 414,94 N. E. 874, 875, stated the rule in this language: ‘Where an assessment is void on its face and a person without duress in fact pays the tax levied upon such assessment, it is a voluntary payment and cannot be recovered. * * * Where an assessment although valid on its face, but in fact illegal and void, is paid by a person with knowledge of the facts which render the assessment void and without duress in fact it is a voluntary payment.’

These are general rules, easy to understand, easy to express. So frequently have they been used that we are tempted to fall into the habit of using them like a yardstick, as if they gave an accurate and unvarying measure. Like all general rules, common and frequent use may dull our sense of their meaning and of their early application leading us to overlook their exceptions and limitations. Payment to trustees in bankruptcy, for instance, is an exception. Ex parte James, L. R. 9 Ch. App. 609-614. Few rules of law can be applied without examination or analysis. The notion that the fundamental principles of law have been modified or changed when new circumstances present new phases of application is a mistaken one. We do not make the facts to fit a rigid formula, but rather re-examine our formulae to see whether they fit the facts. Therefore this rule of voluntary payment is dependent upon what is considered voluntary and what duress, also upon what is a mistake of law, as distinguished from a mistake of fact, and the determination of these questions varies the application of the rule. When we speak of duress in this connection, it does not necessarily mean personal fear or the use of force, but rather that pressure of circumstances which compels the will of man to yield to an exaction or a payment to release his property from some illegal hold upon it. Thus, paying unlawful freight charges to get personal property has been held to be involuntary. Harmony v. Bingham, 12 N. Y. 99, 62 Am. Dec. 142, and cases there reviewed. Money paid ‘through necessity and the urgency of the case’ was held not to be a voluntary payment.

The expression which runs through the cases is that duress exists when the payment of money becomes necessary to obtain the immediate liberty of person or the possession of property. Tripler v. City of New York, 125 N. Y. 617, 626,26 N. E. 721. This statement is the embodiment of a principle and has not yet crystallized around the particular facts of the cases in which it is stated. It still yields to the reason of other situations. Judge Folger, of this court, in Peyser v. Mayor, etc., of City of New York, 70 N. Y. 497, 500 (26 Am. Rep. 624) has stated the reason for this rule of voluntary payment, which lies behind these various expressions of the principle: ‘The reason of this principle is, that a person shall not be permitted, with the knowledge that the demand made upon him is illegal and unfounded, to make payment without resistance, where resistance is lawful and possible, and afterwards to choose his own time to bring an action for restoration, when, perchance, his adversary has lost the evidence to sustain his side. I have spoken of coercion in fact and coercion by law. By the first I mean that duress of person or goods, where present liberty of person or immediate possession of goods is so needful and desirable, as that an action or proceedings at law to recover them will not at all answer the pressing purpose.’

Let this reasoning be the heart of this rule of voluntary payment, giving it life sufficient to survive under modern conditions. With this concatenantion of rule and reason, let us approach the facts of this case.

The Charter of the city of New York (Laws 1901, c. 466, as amended), by section 391, provides that no street pavements shall be removed or disturbed without a permit from the president of the borough and ‘whenever any portion of the pavement * ** shall have been removed * * * and * * * shall not be relaid in a manner satisfactory to the president of said borough, the said president may cause a notice, in writing, to be served upon the person or corporation by whom the same was removed; or * * * upon the owner * * * requiring such person * * * to have such pavement properly relaid within five days after service of such notice.’ The section then provides that, in case such work is not done, pursuant to the notice, the borough president may do the work and certify the cost to the comptroller ‘with a description of the lot or premises to improve which such removal was made.’ The comptroller thereupon shall pay the bill ‘and the amount so paid shall become a lien and charge upon the premises so described, and, on being certified by the comptroller to the collector of assessments and arrears, may be collected in the same manner that arrears and water rates are collected under the direction of such collector of assessments and arrears.’ Title 5 of the Charter provides for the sales of lands for taxes, assessments, and water rates. Sections from 1026 to 1039 give the procedure, a summary of which is all that is necessary here. The lien created under section 391 draws interest as a penalty at the rate of 7 per cent. per annum. After remaining unpaid for a term of three or four years, the tax lien is sold to the highest bidder, who is to bid according to a rate of interest to be allowed, and who thereafter may foreclose the lien as a mortgage or any other lien upon real property. The main point for our purpose in this procedure is that no action is necessary to establish the lien; it is created by the certificate of the borough president to the comptroller and by the comptroller to the collector of assessments and arrears. A penalty for nonpayment is 7 per cent. To redeem the property from the lien, it is necessary not only to pay all penalties, but the cost of advertising and other expenses created by the act.

The plaintiff is a foreign corporation duly authorized to do business in the state of New York. It was the owner in fee simple of the premises known as Nos. 4 to 16 West Thirty-Fifth street, in the borough of Manhattan, New York City. These premises were subject to a mortgage for $1,600,000 held by the Mutual Life Insurance Company, which provided that the mortgagee at its option could declare the entire principal sum due if taxes, assessments, etc., were not paid within 90 days afterthey became due. The premises were leased to James McCreery & Co., a domestic corporation, which carried on a department store business. In 1914 the city of New York built a new sewer in Thirty-Fifth street in front of the plaintiff's premises. From time to time after the construction of this sewer, the pavement sank, and the street had to be filled in and regraded.

Some time in September or October, 1921, a considerable shrinkage occurred over the manhold in front of the entrance to plaintiff's building, which the city filled in and regraded.

On November 7, 1921, there was a break in the valve and the water service pipe leading from the street to the plaintiff's premises. The settling of the ground in the street had caused a break in the pipe.

On November 17, 1921, the president of the borough of Manhattan caused to be served upon the owner or occupant a notice under section 391 of the Greater New York Charter, referred to above. It read:

‘You will please take notice that 175 sq. yds. of pavement have been destroyed by leak on Water Service leading to premises No. 4 to 6 W. 35th St.

‘As provided by Section 391 of the Greater New York Charter, you are hereby notified to have such pavement properly relaid within five (5) days after service of this notice.’

The work called for by the notice not having been done, the city relaid the pavement, and on December 12, 1921, demanded from the owner, the plaintiff herein, the sum of $2,241.09 for repairing 388 square yards of pavement.

On March 18, 1922, the amount of the bill was certified as a lien by the comptroller to the collector of assessments and arrears, pursuant to the provisions of the charter, above referred to. This certificate used these words: ‘Said pavement having been destroyed because of shutting off of live tap.’ The collector of assessments and arrears also notified the owner that this amount had become a lien upon its property, pursuant to section 391 of the charter. According to title 5 thereof, for the collection of assessments and water rates, the comptroller gave public notice by advertisement in the press that this assessment for the repair of the pavement had become a lien upon the premises, and, ‘unless the amount assessed for benefit on any person or property shall be paid on or before May 22, 1922, which is sixty days after the date of said entry of the assessment, interest will be collected thereon at the rate of 7 per cent. per annum to be calculated from ten days...