Video Aid Corp. v. Town of Wallkill

• Citation: 651 N.E.2d 886,628 N.Y.S.2d 18,85 N.Y.2d 663
• Parties: , 651 N.E.2d 886 VIDEO AID CORP. et al., Respondents, v. TOWN OF WALLKILL, Appellant.
• Decision Date: 11 May 1995
• Court: New York Court of Appeals Court of Appeals

Page 18

628 N.Y.S.2d 18

85 N.Y.2d 663, 651 N.E.2d 886

VIDEO AID CORP. et al., Respondents, v. TOWN OF WALLKILL, Appellant.

Court of Appeals of New York.

May 11, 1995.

[85 N.Y.2d 664] [651 N.E.2d 887] Monte J. Rosenstein, Middletown, for appellant.

Burt J. Blustein, Middletown, for respondents.

OPINION OF THE COURT

CIPARICK, Judge.

Plaintiffs remitted $27,000 to defendant in satisfaction of sewer and water tap-in fees due in conjunction with their application for a building permit to proceed with their planned renovation of new business premises in Wallkill. The fees, adopted by defendant in response to mandates imposed by the State and Federal governments to upgrade Wallkill's sewer and water systems, were subsequently declared unconstitutional and plaintiffs were awarded a judgment in the amount of the fees paid plus interest, costs and disbursements. On this appeal, defendant challenges plaintiffs' entitlement to the refund based on plaintiffs' failure to register any protest upon payment of the sewer and water tap-in fees.

On January 12, 1989, defendant adopted Resolution No. 1, imposing a $2,000 tap-in fee for each eight-fixture unit connected to the Town water system, and Resolution No. 2, establishing a $2,500 tap-in fee for each eight-fixture unit connected to the Wallkill sewer system. Each resolution directed that all fees were to be deposited into capital improvement funds respectively earmarked for the water and sewer systems.

Thus, after plaintiffs submitted their application for a building permit together with the $11,000 permit fee on December 11, 1991, they were advised by defendant that no permit would issue until the sewer and water tap-in fees were remitted in accordance with Resolutions Nos. 1 and 2. Following an inquiry to Wallkill's Building Inspector, plaintiffs determined to remit $27,000 for sewer and water tap-in fees to ensure there would be no delay in the issuance of the building permit and disruption of their proposed expansion plans. Plaintiffs were in the process of expanding their business operations by renovating vacant space adjacent to their present quarters. It is particularly significant that at the time plaintiffs remitted the tap-in fees only the architectural plans for the "build-out" of the additional space had been secured. No dates had yet been fixed by contract for the actual renovation to commence. Plaintiffs assert that it remains uncontroverted that the subject premises were fully connected to Wallkill's water and sewer systems, and all they sought was an extension of the lines into that portion of the interior they were renovating to install plumbing fixtures. Plaintiffs represent that this work did not require any effort or expense on defendant's behalf. Yet, without formal protest, plaintiffs remitted the $27,000 fee to defendant by check dated January 8, 1992. Plaintiffs now contend that this payment was coerced, alleging that no work could progress on the premises absent payment of this arbitrary and unreasonable fee.

Plaintiffs instituted this action seeking a judgment declaring Resolutions Nos. 1 and 2 unconstitutional and a refund of moneys paid as an illegal tax under these resolutions. Supreme Court granted plaintiffs' motion for summary judgment, declaring the resolutions void as unconstitutional and awarding plaintiffs judgment for fees paid under Resolutions Nos. 1 and 2. Supreme Court further denied defendant's cross motion to dismiss the complaint. The Appellate Division affirmed, holding that Video Aid Corp. involuntarily paid the fees to avoid a threatened interference with the immediate possession of its property (see, Video Aid Corp. v. Town of Wallkill, 203 A.D.2d 554, 610 N.Y.S.2d 610). The Appellate Division was persuaded that this fact together with the prompt commencement of this action challenging the fees demonstrated the involuntariness of plaintiffs' payment, and that Wallkill would be unjustly enriched if permitted to retain the tap-in fees it improperly extracted from plaintiffs (see, id., at 557, 610 N.Y.S.2d 610). We granted leave to appeal to defendant, and now reverse the order of the Appellate Division to the extent it directed a refund. ¹ The issue presented here is whether plaintiffs have established that nonpayment of the tap-in fees would have interfered with their immediate possession of the property, supporting the claim that the $27,000 fee was paid under duress. We conclude that plaintiffs are not entitled to a refund. Nothing in this case compels departure from the established rule that the voluntary payment of a municipal fee that is subsequently nullified is not recoverable.

The settled law is that the payment of a tax or fee cannot be recovered subsequent to the invalidation of the taxing statute or rule, unless the taxpayer can demonstrate that the payment was involuntary (see, City of Rochester v. Chiarella, 58 N.Y.2d 316, 323, 461 N.Y.S.2d 244, 448 N.E.2d 98, cert. denied sub. nom. Quality Packaging Supply Corp. v. City of Rochester, 464 U.S. 828, 104 S.Ct. 102, 78 L.Ed.2d 106; Mercury Mach. Importing Corp. v. City of New York, 3 N.Y.2d 418, 424-425, 165 N.Y.S.2d 517, 144 N.E.2d 400; Adrico Realty Corp. v. City of New York, 250 N.Y. 29, 32, 164 N.E. 732; accord, City of Rochester v. Chiarella, 65 N.Y.2d 92, 99, 490 N.Y.S.2d 174, 479 N.E.2d 810, rev. 100 A.D.2d 46, 473 N.Y.S.2d 87). In reality, the payment of a tax or municipal fee is by nature involuntary. Whether a payment is considered involuntary in the context of an action for reimbursement of taxes or fees paid to a governmental entity is a question of intention to be resolved upon consideration of the totality of the circumstances (see, City of Rochester v. Chiarella, 58 N.Y.2d, at 325, 461 N.Y.S.2d 244, 448 N.E.2d 98, supra; People ex rel. Wessell, Nickel & Gross v. Craig, 236 N.Y. 100, 105, 140 N.E. 209).

Payment under express protest is an indication that a tax is not paid voluntarily (see, Mercury Mach. Importing Corp. v. City of New York, 3 N.Y.2d, at 424, 165 N.Y.S.2d 517, 144 N.E.2d 400, supra ). Where protest has been interposed, the municipality is notified that it may be obliged to refund the taxes and must be prepared to meet that contingency (see, id., at 426, 165 N.Y.S.2d 517, 144 N.E.2d 400). Otherwise, moneys remitted as taxes or fees are applied to authorized public expenditures, and financial provision is not made for refunds. In situations where payment of the tax or fee is made under actual duress or coercion, which is present when payment is necessary to avoid threatened interference with present liberty of person or immediate possession of property, the failure to formally protest will be excused (see, Mercury Mach. Importing Corp. v. City of New York, 3 N.Y.2d at 425, 165 N.Y.S.2d 517, 144 N.E.2d 400, supra; Five Boro Elec. Contrs. Assn. v. City of New York, 12 N.Y.2d 146, 149-150, 237 N.Y.S.2d 315, 187 N.E.2d 774; Adrico Realty Corp. v. City of New York, 250 N.Y. at 32, 164 N.E. 732, supra ). ²

Determinative of the voluntary nature of plaintiffs' payment of the sewer and water tap-in fees is the absence of any evidence of actual duress and their failure to register any formal protest at the time of payment (cf. People ex rel. Wessell, Nickel & Gross v. Craig, 236 N.Y., at 105, 140 N.E. 209, supra [pendency of certiorari proceeding "at least the equivalent of protest"]; Corporate Prop. Investors v. Board of Assessors, 153 A.D.2d 656, 660, 545 N.Y.S.2d 166, appeal dismissed in part, denied in part 75 N.Y.2d 802, 552 N.Y.S.2d 102, 551 N.E.2d 595, affd sub nom. Matter of Bowery Sav. Bank v. Board of Assessors, 80 N.Y.2d 961, 590 N.Y.S.2d 876, 605 N.E.2d 363 [protest established by pendency of legal proceeding at time of payment in each year recovery sought]; but see, Conklin v. Town of Southampton, 141 A.D.2d 596, 598, 529 N.Y.S.2d 517 [drastic financial and administrative implications prompted finding that commencement of action on behalf of potentially aggrieved real estate taxpayers did not constitute protest by each proposed class member]. As defendant acknowledged, had plaintiffs simply written "without prejudice" or "under protest" on the check they tendered as payment--which they concede they did not--the involuntary nature of the payment would have been established.

That plaintiffs anticipated disruption of their tight renovation schedule absent prompt payment of the tap-in fees is insufficient to constitute duress or coercion and excuse formal protest (see, Adrico Realty Corp. v. City of New York, 250 N.Y., at 33, 164 N.E. 732, supra [taxpayer who remits payment to release property from an illegal hold or lien does so under duress]; Tripler v. Mayor of City of N.Y., 125 N.Y. 617, 631, 26 N.E. 721; Goldberg v. City of New York, 260 App.Div. 61, 20 N.Y.S.2d 801, affd without opn 285 N.Y. 705, 34 N.E.2d 386). Even if we were to accept the dissent's proposition that such "interference" with the expansion of an existing business is equivalent to the duress suffered by licensees whose nonpayment of the fee would deprive them of their very livelihood (see, Five Boro Elec. Contrs. Assn. v. City of New York, 12 N.Y.2d, at 148-149, 237 N.Y.S.2d 315, 187 N.E.2d 774, supra ), the record in this case is devoid of any facts supporting plaintiffs' claim that they would suffer harm as a result of nonpayment of the tap-in fees.

Duress is present in situations where the taxpayer's only alternative is to submit to the illegal exaction or discontinue its business (see, Five Boro Elec. Contrs. Assn., v. City of New York, 12 N.Y.2d, at 149, 237 N.Y.S.2d 315, 187 N.E.2d 774, supra; Mercury Mach. Importing Corp. v. City of New York, 3 N.Y.2d, at 425, 165 N.Y.S.2d 517, 144 N.E.2d 400, supra; Boris Leasing Corp. v. City of New York, 285 App.Div. 126, 129, 136 N.Y.S.2d 46, affd for reasons stated below 309 N.Y. 682, 128 N.E.2d 324). The situation presented in Five Boro is illustrative.

For a four-year period, New York City...