Newburgh Sav. Bank v. Town of Woodbury

• Decision Date: 06 January 1903
• Citation: 173 N.Y. 55,65 N.E. 858
• Parties: NEWBURGH SAV. BANK v. TOWN OF WOODBURY et al.
• Court: New York Court of Appeals Court of Appeals

173 N.Y. 55

65 N.E. 858

NEWBURGH SAV. BANK

v.TOWN OF WOODBURY et al.

Court of Appeals of New York.

Jan. 6, 1903.

Appeal from supreme Court, appellate division, Second department.

Action by the Newburgh Savings Bank against the town of Woodbury and others. From an order of the appellate division (72 N. Y. Supp. 222) reversing a judgment for plaintiff at the trial term, plaintiff appeals. Affirmed.

Charles F. Brown, for appellant.

J. W. Gott, for respondents.

O'BRIEN, J.

On the first day of February, 1894, the plaintiff purchased from the supervisor of the town of Woodbury, one of the organized towns of Orange county, four bonds of $1,000 each, issued by the town, bearing date on that day, and payable respectively in one, two, three, and four years thereafter. The bonds were authorized to be issued by the board of supervisors of the county, under chapter 664 of the Laws of 1892, for the relief of certain persons drafted into the military service of the United States under the act of congress passed March 3, 1863, known as the ‘Conscription Act.’ The bonds on their face disclosed the authority under which they were issued and the purpose to which they were to be applied. The statute under which they were issued was declared by this court to be void, as in conflict with the state constitution. Bush v. Board, 159 N. Y. 212, 53 N. E. 1121,45 L. R. A. 556, 70 Am. St. Rep. 538. The plaintiff brought this action against the town, the county treasurer, and three drafted men who had been paid money under the provisions of the act. No relief was asked against the town, and it is only a nominal party. The relief demanded against the county treasurer was that he account for and pay to the plaintiff such part of the money as remained in his hands as could be traced as the proceeds of the bonds paid by the plaintiff to the town, and the relief demanded against the drafted men was that they pay over to the plaintiff any moneys received by them which could be traced in like manner. At the trial judgment was rendered in favor of the plaintiff against the county treasurer and the drafted men for certain sums or amounts that were found to represent the proceeds of the bonds or moneys paid to the town by the plaintiff upon the purchase of the bonds. No judgment was rendered against the town. The county treasurer took no appeal from the judgment, and but two of the drafted men appealed. On their appeal the judgment rendered against them was reversed at the appellate division, and a new trial granted, and from that judgment the plaintiff has appealed to this court.

The only question presented by the appeal is whether these two persons were liable to the plaintiff, and, if so, the amount of the liability. The proceeds of the bonds were intermingled with other moneys in the treasury. One of the bonds was paid when due, and various questions of the right to interest and the methods of tracing the proceeds are involved in the inquiry concerning the amount of the liability. If these questions were material to the disposition of the case, it is only fair to say that some of the objections presented and argued by the learned counsel for the defendants would be difficult to answer; but in the view that we are disposed to take with respect to the fundamental question involved, it will not be necessary to consider them. If the defendants are not liable at all, any errors committed in the statement of the account against them become wholly immaterial. The learned court below has held that they are not liable, since the money received by them was under a mutual mistake of law and under a claim of right, and therefore cannot be recovered from them by the plaintiff. That proposition presents the real and important question in the case. That the act under which the bonds were issued was void is admitted on all sides and at every stage of the argument. It should also be noted that the case contains no element of fraud, and no question of a trust in favor of or against any one, and hence certain cases cited from this court, where one or both of these elements were present and made the basis of an action to compel the restoration of money, have no application. Refining Co. v. Fancher, 145 N. Y. 552, 40 N. E. 206,27 L. R. A. 757;Holmes v. Gilman, 138 N. Y. 369, 34 N. E. 205,20 L. R. A. 566, 34 Am. St. Rep. 463. The original transaction was a loan of money by the plaintiff to the town upon the security of its bonds. There is no doubt that, where a municipal corporation borrows money upon a void security, it may be compelled to restore the money to the lender so long as the money remains in the treasury or under the control of the corporation; but such cases do not involve the question of payment under a mistake of law. The right to restoration of money so received rests upon the principle that there was no consideration, and that it would be unjust in the forum of conscience for the corporation to retain it. Many of the cases cited by the learned counsel for the plaintiff are cases of this character, where in the discussion the effect of a mistake of law is often referred to arguendo, but was not really involved, or made the basis of any recovery.

It must be conceded that in most text-books on equity jurisprudence, and in some of the adjudged cases, dicta or argument of more or less force and authority may be found to the effect that in some cases equity will grant relief founded upon a mistake of law. In none of the authorities cited by the learned counsel for the plaintiff is the principle stated in clearer or broader language, or more favorably for his contention, that by Mr. Pomeroy in his work on Equity Jurisprudence. We may adopt all that he says with reference to the general rule and its qualifications and limitations, since the views of the learned author occupy a very prominent place in the printed argument submitted in support of the appeal: ‘The doctrine is settled that, in general, a mistake of law, pure and simple, is not adequate ground for relief. Where a party with knowledge of all the material facts, and without any other special circumstances giving rise to an equity in his behalf, enters into a transaction affecting his interests, rights, and liabilities under an ignorance or error with respect to the rules of law controlling the case, courts will not in general relieve him from the consequences of his mistake. * * * While this general doctrine prevails in equity as well as at law, its operation is not universal. It is subject to modifications and limitations. Equity does sometimes exercise its jurisdiction on the occasion of mistakes of law. If the mistake of law is not pure and simple, but is induced or accompanied by other special facts giving rise to an independent equity in behalf of the mistaken person,-such as inequitable conduct of the other pa...