Parsa v. State

• Decision Date: 27 December 1984
• Citation: 64 N.Y.2d 143,474 N.E.2d 235,485 N.Y.S.2d 27
• Court: New York Court of Appeals Court of Appeals
• Parties: , 474 N.E.2d 235, 23 Ed. Law Rep. 212, 8 Soc.Sec.Rep.Ser. 856, Medicare & Medicaid Guide P 34,519 Ismail PARSA, Respondent, v. STATE of New York, Appellant.

Page 27

485 N.Y.S.2d 27

64 N.Y.2d 143, 474 N.E.2d 235, 23 Ed.

Law Rep. 212,

8 Soc.Sec.Rep.Ser. 856,

Medicare & Medicaid Guide P 34,519

Ismail PARSA, Respondent, v. STATE of New York, Appellant.

Court of Appeals of New York.

Dec. 27, 1984.

Robert Abrams, Atty. Gen. (Betsy Broder and Peter H. Schiff, Asst. Attys. Gen., of counsel), for appellant

Morris Weissberg and Robert J. Krengel, New York City, for respondent.

OPINION OF THE COURT

SIMONS, Judge.

Claimant is a physician and a full-time professor of pathology at Downstate College of Medicine, a branch of the State University of New York. The State pays him a salary for his duties as professor and it pays him supplemental compensation for pathology services as a member of Downstate Pathology Associates, P.C. In this action claimant seeks further compensation for services performed in Downstate's kidney transplant program for end stage renal disease (ESRD) patients during a two-year period from April 1, 1981 to March 31, 1983. A proposed agreement between claimant and Downstate had been drafted which authorized payments of $145,000 per year for these services, but it was not executed by Downstate or approved by the State Comptroller. Downstate received Medicare benefits for ESRD patients from the Federal Government during this period, however, and paid part of them to claimant to compensate him for the services he had performed in the ESRD program. He rejected the payment as inadequate and instituted this action in the Court of Claims, claiming that the State owes him more.

Claimant's first and third causes of action are for money had and received. He alleges that a portion of the Medicare funds paid by the Federal Government to the State equalling $290,000 represented two years' compensation for his services in the ESRD program and that it rightfully belongs to him. His second and fourth causes of action seek relief in the nature of mandamus directing Downstate to comply with the Federal statute and to pay claimant $290,000 for his professional services. The State moved to dismiss the claim asserting that it failed to state a cause of action because claimant had not obtained approval of the payments by the State Comptroller as section 112 of the State Finance Law requires. ¹ The Court of Claims granted the State's motion, ruling that it lacked jurisdiction to adjudicate claims for money had and received and claims seeking relief in the nature of mandamus. The Appellate Division, 100 A.D.2d 899, 474 N.Y.S.2d 562, modified that order by reinstating the first and third causes of action. The court believed that Downstate was merely acting as a conduit in receiving Medicare funds representing compensation for claimant's services and that those funds belonged to him. It ruled, therefore, that claimant could assert a cause of action for money had and received, that the action was at law and within the jurisdiction of the Court of Claims and that it was not foreclosed by section 112 of the State Finance Law. It agreed that the second and fourth causes of action seeking relief in the nature of mandamus could not be maintained in the Court of Claims and that ruling is not contested.

A party contracting with the State is chargeable with knowledge of the statutes which regulate its contracting powers and is bound by them (Belmar Contr. Co. v. State of New York, 233 N.Y. 189, 194, 135 N.E. 240). Moreover, the State's acceptance of benefits furnished under a contract made without authority does not estop it from challenging the validity of the contract or from denying liability pursuant to it (Becker & Assoc. v. State of New York, 48 N.Y.2d 867, 424 N.Y.S.2d 353, 400 N.E.2d 295, affg. 65 A.D.2d 65, 410 N.Y.S.2d 699; see, also, Seif v. City of Long Beach, 286 N.Y. 382, 36 N.E.2d 630; McDonald v. Mayor of City of N.Y., 68 N.Y. 23). Even though a promise to pay may be spelled out from the parties' conduct, a contract between them may not be implied to provide "rough justice" and fasten liability on the State when applicable statutes expressly prohibit it (see Lutzken v. City of Rochester, 7 A.D.2d 498, 184 N.Y.S.2d 483). The result may seem unjust but any other rule would completely frustrate statutes designed to protect the public from governmental misconduct or improvidence. The contractor's option is to withhold his services unless an agreement is executed and approved as the statutes require.

The Legislature has specified that contracts exceeding $5,000 shall not be effective unless first approved by the State Comptroller. Inasmuch as claimant's contract was neither executed by the State nor approved by the Comptroller, he may not maintain an action on it (see Becker & Assoc. v. State of New York, 48 N.Y.2d 867, 424 N.Y.S.2d 353, 400 N.E.2d 295, supra ). Nor does he claim that he may. He contends that notwithstanding Downstate's failure to execute the contract or to obtain the Comptroller's approval, his claim may be maintained as an action resting on implied contract, an action for money had and received. We agree with the Appellate Division that an action for money had and received is an action at law which may be maintained in the Court of Claims but we disagree that claimant has stated a right to recover under the circumstances presented. We therefore reverse and dismiss the claim.

It is important at the outset to note that the courts recognize two different types of implied contract. The first, a contract implied in fact, rests upon the conduct of the parties and not their verbal or written words. It is a true contract based upon an implied promise and therefore it is subject to the provisions of section 112 of the State Finance Law.

The second type, the type claimed here for money had and received is a contract implied in law. Although the action is recognized as an action in implied contract, the name is something of a misnomer because it is not an action founded on contract at all; it is an obligation which the law creates in the absence of agreement when one party possesses money that in equity and good conscience he ought not to retain and that belongs to another (Miller v. Schloss, 218 N.Y. 400, 406-407, 113 N.E. 337). It allows plaintiff to recover money which has come into the hands of the defendant "impressed with a species of trust" (see Chapman v. Forbes, 123 N.Y. 532, 537, 26 N.E. 3) because under the circumstances it is " 'against good conscience for the defendant to keep the money' " (Federal Ins. Co. v. Groveland State Bank, 37 N.Y.2d 252, 258, 372 N.Y.S.2d 18, 333 N.E.2d 334, quoting from Schank v. Schuchman, 212 N.Y. 352, 358, 106 N.E. 127). The remedy is available "if one man has obtained money from another, through the medium of oppression, imposition, extortion, or deceit, or by the commission of a trespass" (Miller v. Schloss, supra, 218 N.Y. p. 408, 113 N.E. 337). The action depends upon equitable principles in the sense that broad considerations of right, justice and morality apply to it, but it has long been considered an action at law (see Roberts v. Ely, 113 N.Y. 128, 20 N.E. 606; Diefenthaler v. Mayor of City of N.Y., 111 N.Y. 331, 337, 19 N.E. 48). An action for money had and received has been permitted against a public body in instances where plaintiff has paid money by mistake, money has been collected for an illegal tax or assessment, or property is erroneously taken or withheld by a public official (McDonald v. Mayor of City of N.Y., 68 N.Y. 23, 29, supra; see, e.g., Niagara Mohawk Power Corp. v. City School Dist., 59 N.Y.2d 262, 464 N.Y.S.2d 449, 451 N.E.2d 207; and New York R.T. Corp. v. City of New York, 275 N.Y. 258, 264, 9 N.E.2d 858, affd 303 U.S. 573, 58 S.Ct. 721, 82 L.Ed. 1024 County of Oneida v. First Citizens Bank & Trust Co., 264 App.Div. 212, 35 N.Y.S.2d 782 ).

Subdivision 2 of section 9 of the Court of Claims Act gives that court jurisdiction to determine claims for "breach of contract, express or implied". The court had jurisdiction to adjudicate this claim for money had and received, therefore, because it states a legal cause of action for money damages founded upon an implied in law contract (see Stone v. White, 301 U.S. 532, 534-535, 57 S.Ct. 851, 852-53, 81 L.Ed. 1265; Matter of First Nat. City Bank v. City of New York Fin. Admin., 36 N.Y.2d 87, 365 N.Y.S.2d 493, 324 N.E.2d 861). The action is not barred by section 112 of the State Finance Law because claimant is not seeking to enforce an agreement; he is seeking to recover funds from the State which he alleges belong to him and which the State is wrongfully withholding from him. His cause of action is predicated on his claim that he is entitled to $290,000 of the Medicare funds paid by the Federal Government to Downstate and, in the language of the cases, that...