Smith v. Hudacs

• Decision Date: 29 April 1993
• Citation: 158 Misc.2d 149,599 N.Y.S.2d 902
• Parties: In the Matter of the Application of Boice M. SMITH, Petitioner, v. John F. HUDACS, as Commissioner of New York State Office of General Services, State of New York Office of General Services, and Edward Regan, as Comptroller of the State of New York, Respondents.
• Court: New York Supreme Court

Page 902

599 N.Y.S.2d 902

158 Misc.2d 149

In the Matter of the Application of Boice M. SMITH, Petitioner, v. John F. HUDACS, as Commissioner of New York State Office of

General Services, State of New York Office of

General Services, and Edward Regan, as

Comptroller of the State of

New York, Respondents.

Supreme Court, Albany County.

April 29, 1993.

Nancy E. Hoffman (Robert T. DeCataldo, of counsel), Albany, for petitioner.

Robert Abrams, New York State Atty. Gen. (Amy Schallop, Asst. Atty. Gen., of counsel), New York State Dept. of Law, Albany, for respondents.

JOSEPH HARRIS, Justice.

Petitioner seeks judgment, pursuant to CPLR Article 78, declaring null and void, as arbitrary and capricious, and in violation of due process, respondents' determination to set-off and recoup from petitioner's lump sum separation from service entitlement, monies alleged to have been overpaid petitioner due to his submission of allegedly fraudulent time sheets and remanding the matter back for a hearing before the respondents.

In support of the relief requested, the petitioner contends that the Office of General Services (hereinafter referred to as "OGS") lacked the authority to reduce petitioner's severance pay entitlement; that the Comptroller's reduction of petitioner's severance entitlement violated section 200(3)(b)(iii) of the New York State Finance Law; and the procedure utilized to recoup the monies allegedly owed violated petitioner's fundamental due process rights.

It is beyond question that the Comptroller has the inherent authority, pursuant to his duties as the State's chief fiscal officer, to offset valid claims of the State of New York against claims made against the State. In the case of Williams Press, Inc. v. State of New York, 45 A.D.2d 397, 357 N.Y.S.2d 920, the Court sustained the Comptroller's action, in offsetting overpayments made to the claimant under past contracts against current bills for services performed, against a procedural due process challenge, stating that ( supra, at 403, 357 N.Y.S.2d 920):

"Since the Comptroller acts for the State in its fiscal affairs generally, and since the payment of any money under the control of the State is void unless approved by his audit ... it would seem that he has the right to offset any VALID claim of the State against one to whom money under his control is due from the State." [emphasis added.]

This recoupment and offset authority is derived from the Comptroller's "constitutional and statutory duty to audit all vouchers before payment. N.Y. Const., art. V, sec. 1; State Finance Law, sec. 8 ..." Matter of Carlon v. Regan, 98 A.D.2d 544, 546, 471 N.Y.S.2d 896, affirmed as modified 63 N.Y.2d 1011, 484 N.Y.S.2d 506, 473 N.E.2d 734. Moreover, it is clear from both the New York State Constitution and case law that the Comptroller, "in the exercise of his power to audit acts in a quasi-judicial capacity" (City of New York v. State of New York, 40 N.Y.2d 659, 667, 389 N.Y.S.2d 332, 357 N.E.2d 988), may hear, examine, pass upon, settle, and adjust and issue opinions respecting claims against the State fisc. People ex rel. Grannis v. Roberts, 163 N.Y. 70, 57 N.E. 98. Acting in this capacity the Comptroller has both the right, and indeed the duty, to render a due process determination as to the validity of the State's claim and whether an off-set is appropriate.

Contrary to petitioner's claim, section 200(3) of the New York State Finance Law ¹ is consistent with and does not purport to abrogate the Comptroller's common law right of set-off in this particular circumstance. See Van Amerogen v. Donnini, 78 N.Y.2d 880, 885, 573 N.Y.S.2d 443, 577 N.E.2d 1035 (Bellacosa, J., dissenting) holding that "statutes which derogate from common law are ... to be strictly construed"; N.Y. Statutes, sec. 301 [McKinney's]. Here, respondent's alleged overpayment is not claimed to have resulted from the state's "administrative error", but is alleged to have been induced by the petitioner's submission of fraudulent time sheets, claiming unearned overtime pay. As such, the conduct complained of does not appear to fall within the ambit of subdivision (a) of section 200(3) of the State Finance Law. Moreover, even if the alleged overpayment could be construed to have resulted from the Comptroller's error, petitioner's conduct, in submitting allegedly false vouchers, falls within the exceptions of both section 200(3)(b)(ii) and (iii) of the State Finance Law and thus would not diminish the Comptroller's recoupment authority.

While petitioner's salary entitlement constitutes an important and significant property interest, the nature of this interest, as salary, does not insulate it from set-off. Matter of Leirer v. Caputo, 181 A.D.2d 119, 586 N.Y.S.2d 976. In Leirer, the Appellate Division, Second Department held that the Suffolk County Comptroller possessed "the inherent authority, pursuant to his express duties as the chief fiscal officer of the County, to recoup alleged salary overpayments from the wages of a County employee ..." who the Comptroller determined "had been absent without authorization for a total of 665 hours, and thus had received an overpayment of $13,614.90 in unearned wages." Id. at 120-121, 586 N.Y.S.2d 976.

In reaching this determination, however, the Court emphasized the fact that the petitioner had been afforded the opportunity to submit evidence of her work attendance, attend conferences with and submit documentation to the Comptroller in an attempt to resolve the matter, prior to the Comptroller rendering his determination regarding the validity of the County's claim against the petitioner. Id. at 127, 586 N.Y.S.2d 976. Thus while the Comptroller has the inherent authority to recoup an overpayment made to an employee from the employee's salary, it is evident that a condition precedent to the right of recoupment is a quasi judicial, due process determination by the comptroller that there exists a valid claim subject to recoupment. See: Matter of Leirer v. Caputo, 181 A.D.2d 119, 586 N.Y.S.2d 976; Prue v. City of Syracuse, 124 Misc.2d 1036, 478 N.Y.S.2d 529. Unlike the petitioner in Leirer, supra, however, the instant petitioner was never given notice of the Comptroller's audit of his payroll account or intent to offset the claim for overtime overpayment against his severance allowance until after the Comptroller's action was a fait accompli. Nor was the petitioner afforded a meaningful opportunity to submit evidence or arguments in opposition to the Comptroller's action. Nor did he have a meaningful opportunity to be heard by the agency by which he was employed before that agency requested the offset from the Comptroller.

Prior to March of 1991, the petitioner was employed as a tandem trailer operator with OGS at the Upstate Distribution Center in Rotterdam, New York. At all times herein relevant, petitioner was also a member of a bargaining unit exclusively represented by the Civil Service Employees Association, Inc. (hereinafter referred to as "CSEA"), and was subject to Article 33 of the Collective Bargaining Agreement negotiated by CSEA on his behalf.

On March 7, 1991, petitioner was served with a notice of discipline, under Article 33 of the Collective Bargaining Agreement, charging him with submitting fraudulent time sheets and which further claimed that this submission resulted in petitioner being paid for 61 hours of unearned overtime for the period April 27 through October 23, 1990. The notice of discipline, in accord with the penalties authorized by section 33.3(a)(1) of the Collective Bargaining Agreement ², sought termination of petitioner's employment and recision of his accrued leave credits. While requesting restitution of $1,385.31, the notice of discipline expressly recognized that "restitution ... [was] not ... [an authorized] penalty".

On March 9, 1991, petitioner filed an employee grievance, challenging the OGS disciplinary action, wherein he stated that the "charges are unfounded". ³ The petitioner voluntarily retired from state service on March 27, 1991. Thereafter an "agency level meeting" was held between the representative of OGS and petitioner's representative on April 3, 1991, to discuss resolution of the pending disciplinary charges. See section 33.3(d) of the Collective Bargaining Agreement. While the parties dispute what was said at this meeting and the record is silent as to whether OGS in fact formally withdrew the notice of discipline against the petitioner, it is clear, that in view of petitioner's retirement, OGS abandoned the disciplinary action by failing to issue a written agency response ⁴ and failing to request the appointment of an arbitrator ⁵.

In lieu of pursuing the disciplinary proceeding filed against the petitioner, David T. Flaherty, the OGS Labor Relations Representative responsible for handling petitioner's case, unilaterally directed on April 5, 1991, that the OGS Payroll Unit initiate action to recoup the alleged salary overpayments from petitioner's severance entitlement. After reviewing Mr. Flaherty's calculations, the OGS Payroll Unit again...