Paramount Film Distributing Corp. v. State

• Decision Date: 15 May 1967
• Docket Number: No. 45976,45976
• Citation: 279 N.Y.S.2d 781,27 A.D.2d 420
• Parties: PARAMOUNT FILM DISTRIBUTING CORP., Respondent, v. STATE of New York, Appellant. Claim
• Court: New York Supreme Court — Appellate Division

Page 781

279 N.Y.S.2d 781

27 A.D.2d 420

PARAMOUNT FILM DISTRIBUTING CORP., Respondent, v. STATE of New York, Appellant.

Claim No. 45976.

Supreme Court, Appellate Division, Third Department.

May 15, 1967.

Louis J. Lefkowitz, Atty. Gen., Albany (Ruth K. Toch, Sol. Gen., and Edwin R. Oberwager, Asst. Atty. Gen., Albany, of counsel), for appellant.

Leonard Kaufman, New York City (John R. Davison, Albany, of counsel), for claimant-respondent.

Before GIBSON, P.J., and HERLIHY, REYNOLDS, AULISI and STALEY, JJ.

REYNOLDS, Justice.

This is an appeal from an order of the Court of Claims (Reuss, J.), denying the State's motion to dismiss the claim on the ground that it fails to state a cause of action or alternatively to dismiss that portion of the claim which relates to payments made before May 24, 1965 on the ground that the Court of Claims lacks jurisdiction.

On June 10, 1965, the Court of Appeals in Matter of Trans-Lux Distributing Corp. v. Board of Regents, 16 N.Y.2d 710, 261 N.Y.S.2d 903, 209 N.E.2d 558, held the movie licensing provisions of the Education Law (Education Law, § 120 et seq.) void as violative of the Fourteenth Amendment in accordance with the United States Supreme Court's reversal of an earlier Court of Appeals' decision upholding constitutionality (see, Matter of Trans-Lux Distributing Corp. v. Board of Regents, 14 N.Y.2d 88, 248 N.Y.S.2d 857, 198 N.E.2d 242, revd. 380 U.S. 259, 85 S.Ct. 952, 13 L.Ed.2d 959). On November 24, 1965, claimant filed a notice of intention to file a claim with the clerk of the Court of Claims and in December, 1965, claimant filed the instant claim seeking the refund of fees paid pursuant to the licensing provisions.

The State initially contends that the licensing fees were voluntarily paid without protest and thus should not be recoverable citing Mercury Mach. Imp. Corp. v. City of N.Y., 3 N.Y.2d 418, 165 N.Y.S.2d 517, 144 N.E.2d 400, and Adrico Realty Corp. v. City of N.Y., 250 N.Y. 29, 164 N.E. 732, 64 A.L.R. 1. Concededly no protest was made but there was no statutory requirement of payment under protest. In our opinion the case comes rather within the rationale of Five Boro Elec. Contractors Assn., Inc. v. City v. N.Y., 12 N.Y.2d 146, 237 N.Y.S.2d 315, 187 N.E.2d 774. There the Court of Appeals in upholding the right of New York City electricians to recover excess license fees, the imposition of which had been held unconstitutional, overcame the argument that the payments were voluntarily made stating:

'We agree with Special Term and the Appellate Division that under the circumstances of this case protest was not required in view of the compulsory nature of the payment of these exorbitant license fees. We are aware of the repeated reference in the cases to duress existing 'where present liberty of person or immediate possession of needful goods is threatened by nonpayment of money exacted' (Mercury Mach. Importing Corp v. City of New York, supra, 3 N.Y.2d pp. 425, 165 N.Y.S.2d 517, p. 520, 144 N.E.2d 400, p. 402; Peyser v. Mayor of City of N.Y., supra, 70 N.Y. 497) as well as the statement in Adrico Realty Corp. v. City of New York (supra) that this formula yields to the reason of other situations (250 N.Y. 29, 33, 164 N.E. 732, 733, 64 A.L.R. 1). Here we are not dealing with an illegal tax or impost to redress which some other remedy was available (e.g. Mercury Mach. Importing Corp. v. City of New York, supra; People v. Wilmerding, 136 N.Y. 363, 374, 32 N.E. 1099, 1102), but these electricians were placed in a situation where their only alternative was to submit to an illegal exaction or discontinue their businesses (Swift, etc., & Co. v. United States, 111 U.S. 22, 28, 4 S.Ct. 244, 28 L.Ed. 341). They were not allowed to operate without licenses, nor could their licenses be renewed except by payment of excessive fees. To be sure, the invalidity of this exaction was determined by declaratory judgment in the Adlerstein case (supra) (Adlerstein v. City of New York, 6 N.Y.2d 740, 185 N.Y.S.2d 821, 158 N.E.2d 512), but unless they had paid the excessive fees required for their licenses to do business they would have been prevented from earning a livelihood while that litigation was pending.' (12 N.Y.2d 149--150, 237 N.Y.S.2d 317, 187 N.E.2d 775--776.)

Here the claimant, as the electricians, had to pay the license fees to stay in business and did so solely for that reason. Thus the fees having been paid under duress and not voluntarily were recoverable.

As an alternative bar to the recovery sought, the State contends that since the claimant did not file its notice of claim within six months of its last payment, it did not comply with subdivision 4 of § 10 of the Court of Claims Act and is thus precluded from recovery under Guaranty Trust Co. of New York v. State, 299 N.Y. 295, 86 N.E.2d 754. In Guaranty the Court of Appeals stated:

'Taking the payments of the unemployment insurance contributions in question to have been illegally compelled, the Court of Claims said that 'claimant's cause of action arose immediately that it paid the tax.' (186 Misc. 676, 683, 62 N.Y.S.2d 309, 314.) Such contributions had been paid on October 11, 1939, and January 13, 1940, as we have noticed. It followed, therefore, that the claim had long been barred as the Court of Claims held.' (299 N.Y. at 300, 86 N.E.2d at 756.)

Thus the Court of Appeals clearly held that in Guaranty the cause of action accrued for the return of payments made pursuant to a void statute at the time such payments are made. Claimant urges that Guaranty should not be held applicable in the instant case on the grounds that the cause of action here sought to be asserted did not accrue until June 10, 1965 because until that time there was no competent tribunal in which to proceed to assert their claim for recovery of the fees in question (Homer Eng. Co. v. State, 12 N.Y.2d 508, 510--511, 240 N.Y.S.2d 973, 974--976, 191 N.E.2d 455, 456, 457). Initially claimant asserts that Guaranty is distinguishable because there the claimant had an administrative remedy available to it where, as here, no such alternative exists. Both the Court of Claims' and the Court of Appeals' decision in Guaranty, however, make it abundantly clear that the availability of this alternative administrative remedy was not considered as a controlling factor since the administrative remedy and the Court of Claims' suit were held to be mutually exclusive. Claimant further asserts that since the Court of Claims lacks equity jurisdiction (Psaty v. Duryea, 306 N.Y. 413, 118 N.E.2d 584; 18 East 48th Street Corp. v. State, 19 A.D.2d 940, 244 N.Y.S.2d 446), it could not have tested the unconstitutionality in that tribunal, and since the Supreme Court lacks jurisdiction to direct a money judgment against the State (Adler, Inc. v. Noyes, 285 N.Y. 34, 32 N.E.2d 781), it could not get full relief in that forum either. Thus its only avenue of approach would be to first proceed in Supreme Court to have the licensing statute voided and then, if successful, seek refund from the Court of Claims. This claimant alleges while theoretically a possibility, as a practical matter would not provide relief in most instances. With the court calendars as congested as they are and suits attempting to declare unconstitutional State or local legislation invariably being contested in the appellate courts of the State and even in the United States Supreme Court it must be recognized that in most if not all instances more than two years, the statutory period under § 10(4) of the Court of Claims Act, would have elapsed from the date of payment before the litigation had been settled on the question of constitutionality. Of course, the major premise in this argument is that the suit could not initially be brought in the Court of Claims because of the presence of the constitutional issue. In Psaty v. Duryea (supra) the Court of Appeals stated:

'We may assume that, in determining claims for money damages against the State, the Court of Claims may apply equitable considerations and perhaps, to some extent, may grant some sort of incidental equitable relief, but that concept has nothing to do with this case since this, in essence and by concession, is not a suit for money damages but, primarily an equitable action to cancel and rescind a bid which equitable relief, as plaintiffs concede, was essential before there could be any injunction or mandate for the return of the money. In other words, this was a suit for traditional equitable relief, with the return of the money to follow as a consequence of the equitable relief, if granted.' (306 N.Y. at 417, 118 N.E.2d at 586.)

The test is thus whether the constitutional issue is ancillary to an action for monetary recovery or vice versa. Here the constitutional issue was centered on an objection to the cumbersome review procedures whenever a movie was denied a license. It was only as an incidental happening when the entire statute was struck down that the fee payments also were voided. Thus assuming claimant, who had never been denied a license, had standing to sue, his suit would have to be based not on the validity of the fee itself but the cumbersomeness of the review procedure. As such the constitutional issue would not be ancillary or incidental to the monetary recovery, but rather a separate and distinct issue from which the right to a monetary recovery would be an incidental byproduct. At this point Guaranty becomes readily distinguishable. Concededly, if the issue were in fact faced by the Court of Appeals in Guaranty, it must have found that the suit could have been instituted in the Court of Claims despite the constitutional issue present. But in Guaranty, had the case been sooner brought, the constitutional question would have gone directly to the validity of the tax itself, and its invalidity would have been...