Mercury Mach. Importing Corp. v. City of New York

Citation149 N.Y.S.2d 900,1 A.D.2d 337
PartiesMERCURY MACHINE IMPORTING CORP., Plaintiff-Appellant, v. The CITY OF NEW YORK, Defendant-Respondent.
Decision Date29 March 1956
CourtNew York Supreme Court Appellate Division

Isaac Anolic, New York City, for appellant.

Herbert S. Taten, Ozone Park, of counsel (Stanley Buchsbaum, New York City, with him on the brief. Peter Campbell Brown, Corp. Counsel, New York City, atty.), for respondent.

Before PECK, P. J., and BREITEL, BOTEIN, RABIN and FRANK, JJ.

BOTEIN, Justice.

Plaintiff corporation imports sewing machines from Japan. Its accountant, unaware that transactions in foreign commerce were not subject to the New York City General Business Tax on gross receipts, Chapter 46, Title B, Administrative Code of the City of New York, caused plaintiff to file a tax return and make payment pursuant to it. A year later, realizing the error, plaintiff applied to the Comptroller for return of the payment.

Section B46-7.0 of the Administrative Code, enacted pursuant to Article 2-B of the General City Law, provides that 'the treasurer upon the order of the comptroller shall refund any tax, interest or penalty erroneously, illegally or unconstitutionally collected by or paid to him, under protest in writing, stating in detail the ground or grounds of the protest, if application to the comptroller therefor shall be made within one year from the payment thereof. * * * After making his determination the comptroller shall give notice thereof to the person interested who shall be entitled to maintain a proceeding under article seventy-eight of the civil practice act to review such determination if instituted within thirty days after such determination.' [Emphasis supplied.]

Plaintiff made no protest in writing, for the obvious reason that it did not realize at the time of the payment that it had incurred no tax liability. After hearings were held by the Comptroller, the taxpayer's application for refund was denied, although concededly the city was not entitled to any tax. The hearing officer gave no reasons for the denial of the claim, but the city's brief states it was because the tax had not been paid under written protest.

Rather than seek a review of the determination within 30 days by an Article 78 proceeding, the taxpayer, 69 days later, commenced this plenary action in the Supreme Court to recover from the city for money had and received, alleging that the city had been unjustly enriched by retention of the payment made in error. The city moved to dismiss the complaint under Rule 107, Rules of Civil Practice on the ground that there was a final determination by the Comptroller denying the refund which had not been reviewed within 30 days by an Article 78 proceeding; and that therefore this determination was res judicata, barring the plenary suit. Special Term granted the motion and plaintiff appeals from the order of dismissal.

The Administrative Code, § B46-9.0, provides in substance that the exclusive remedy available to the taxpayer for review of tax liability of the nature involved here lies in application to the Comptroller and that the Comptroller's determination may in turn be reviewed only in an Article 78 proceeding. It is now firmly established, however, that the prescribed remedies or procedures for review are not exclusive when the jurisdiction or authority of the taxing officer is challenged on the ground that the statute is unconstitutional; or where, as here asserted, the statute by its own terms does not apply in a given case, Richfield Oil Corp. of New York v. City of Syracuse, 287 N.Y. 234, 239, 39 N.E.2d 219, 221; Dun & Bradstreet v. City of New York, 276 N.Y. 198, 11 N.E.2d 728; All American Bus Lines, Inc., v. City of New York, 268 App.Div. 508, 52 N.Y.S.2d 689, affirmed 296 N.Y. 571, 68 N.E.2d 869; Booth v. City of New York, 268 App.Div. 502, 52 N.Y.S.2d 135, affirmed 296 N.Y. 573, 68 N.E.2d 870; Stampers Arrival of Buyers, Inc. v. City of New York, 269 App.Div. 741, 54 N.Y.S.2d 706, affirmed 296 N.Y. 574, 575, 68 N.E.2d 871; National Steel Corp. v. City of New York, Sup., 121 N.Y.S.2d 61, affirmed 283 App.Div. 867, 129 N.Y.S.2d 914, leave to appeal denied, 308 N.Y. 745, 125 N.E.2d 104. In such cases the taxpayer is not relegated solely to his administrative remedies and Article 78 review, but may bring appropriate plenary action.

The city argues that these authorities are not applicable in this case because plaintiff has elected his remedy--by administrative review. The city contends that having chosen the administrative process provided by the Administrative Code, the taxpayer may only review the decision rendered in the forum of his choice in an Article 78 proceeding, as alos provided by the Administrative Code. The remedy first invoked was doomed to failure, however, because as above noted, the Comptroller was authorized to make refunds only when the taxpayer made payment 'under protest in writing' § B46-7.0; and plaintiff made no such protest.

True, Article 122 of the Comptroller's Regulations dispenses with the necessity of protest 'in the case of a pure mistake of fact'. No similar dispensation is made for mistakes of law. The Comptroller evidently found that plaintiff paid under mistake of law--an inescapable conclusion--and since no protest had been filed, the Comptroller perforce had to reject the claim.

At this point recourse to review of the Comptroller's action by an Article 78 proceeding would have been completely ineffectual because that official had no authority to grant the taxpayer and relief. And, of course, under Article 78 the Comptroller could not be directed to perform an act beyond the powers delegated to him. Thus, in United Piece Dye Works v. Joseph, 282 App.Div. 60, 65, 121 N.Y.S.2d 683, 687, affirmed 307 N.Y. 780, 121 N.E.2d 617, certiorari denied Gerosa v. United Piece Dye Works, 348 U.S. 916, 75 S.Ct. 298, 99 L.Ed. 718, where the taxpayer followed the Article 78 procedure to review a determination denying a refund, we held the Comptroller was correct in denying a refund because the taxpayer had failed to make timely or proper protest. See also Fredenburg & Lounsbury, Inc., v. Joseph, 280 App.Div. 973, 117 N.Y.S.2d 466.

Here error precluded the possibility of protest, and hence the administrative remedy was unavailable. Must plaintiff then be forever barred because he has selected a remedy so circumscribed by conditions impossible of performance that it is in fact no remedy at all? A contention that a governmental body, by setting up conditions nearly impossible of fulfilment can confer virtual immunity upon itself, free from any claims of unjust enrichment, is intolerable. Fundamentally, a governmental unit has no greater right than an individual to retain moneys to which it is not rightfully entitled. 'No sound reason exists for exonerating even municipal corporations from the controlling effects of this wholesome principle; for it is equally as unjust and inequitable for them to retain money they have acquired without consideration, as it is for a private person to attempt to do so.' Chapman v. City of Brooklyn, 40 N.Y. 372, 380.

The city urges that lack of protest is in effect a waiver of the taxpayer's right to claim a refund, since it indicates a voluntary payment, but...

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