Opinion
June 10, 1999
Appeal from an order of the Supreme Court (Lynch, J.).
Kingsley Towne P.C. (John P. Kingsley of counsel), Catskill, for appellants.
Tabner, Ryan Keniry (John W. Tabner of counsel), Albany, for George J. Pulver Jr., respondent.
Tobin Dempf (Kevin A. Luibrand of counsel), Albany, for Edward P. Stiefel and another, respondents.
Before: MIKOLL, J.P., CREW III, PETERS, SPAIN AND GRAFFEO, JJ.
OPINION AND ORDER
From 1974 through 1995 defendant George J. Pulver Jr. was a partner in a law firm formerly known as Pulver and Stiefel (hereinafter the law firm), during which time he also served as Greene County Attorney. His last two appointments by the County Legislature to three-year terms of office occurred in 1989 and 1992 and, as compensation for the performance of his duties as County Attorney, he received an annual salary. Additionally, from 1990 to 1995, the law firm submitted invoices to and received payments from Greene County totaling $143,334.03 for legal services provided as outside counsel and billed third parties for legal fees related to loan closings conducted for the Greene County Economic Development Revolving Loan Fund.
Plaintiffs commenced a taxpayer action on June 28, 1996 pursuant to General Municipal Law § 51 to recover more than $172,000 alleged to be improperly paid to defendants for work performed on behalf of the County. Plaintiffs moved for summary judgment contending that there were no factual issues which necessitated a trial and defendants cross-moved for summary judgment asserting, inter alia, that the action was barred by the Statute of Limitations. Neither the amount of fees paid nor the quality of services were contested. Supreme Court denied plaintiffs' motion for summary judgment and granted defendants' motion in part. Plaintiffs now appeal.
Initially, we address the threshold issue of the applicable Statute of Limitations pertaining to taxpayer actions under General Municipal Law § 51. Plaintiffs urge the application of a six-year Statute of Limitations, similar to that employed for constructive trusts or, in the alternative, utilization of CPLR 214 which provides that:
The following actions must be commenced within three years: * * * 2. an action to recover upon a liability, penalty or forfeiture created or imposed by statute except as provided in sections 213 and 215.
Defendants disagree, contending that the appropriate Statute of Limitations is found in CPLR 215, which states as follows:
The following actions shall be commenced within one year: * * * 4. an action to enforce a penalty or forfeiture created by statute and given wholly or partly to any person who will prosecute; if the action is not commenced within the year by a private person, it may be commenced on behalf of the state, within three years after the commission of the offense, by the attorney-general or the district attorney of the county where the offense was committed.
It has long been recognized that taxpayer actions are purely statutory creations (see, Duffy v. Longo, 207 A.D.2d 860, 862, appeal dismissed 86 N.Y.2d 779) and, as such, aggrieved taxpayers are permitted only within the confines of the authorizing statute to initiate a cause of action for the recovery of funds improperly paid to a local government official or other person acting on behalf of a county, town, village or municipal corporation. General Municipal Law § 51, however, does not prescribe a period of limitations and, where a statutorily created right of action fails to specify a limitation period, "'it is necessary to examine the substance of that action to identify the relationship out of which the claim arises and the relief sought'" (Hartnett v. New York City Tr. Auth., 86 N.Y.2d 438, 443-444, quotingSolnick v. Whalen, 49 N.Y.2d 224, 229). Therefore, the nature of the remedy rather than the theory of liability is the salient consideration in ascertaining the applicable Statute of Limitations (see,Santulli v. Englert, Reilly McHugh, 78 N.Y.2d 700, 708).
Here, using General Municipal Law § 51 as their litigation vehicle, plaintiffs seek the recovery of voucher payments made to defendants from 1990 to 1995 for legal services, which were allegedly prohibited by Public Officers Law § 67 and County Law § 501. As plaintiffs' causes of action did not exist in common law, they are constrained in their taxpayer capacity by the remedy provided in the statute created to redress their claims. Plaintiffs cannot, therefore, rely on a Statute of Limitations pertaining to actions and remedies of common-law derivation, such as constructive trust, breach of fiduciary duty, fraud or unjust enrichment. Although plaintiffs may invoke Public Officers Law § 67 as the basis for the alleged breach of duty, the fact remains that the action was commenced pursuant to General Municipal Law § 51 and the remedy sought is the recovery of funds on behalf of the County. Thus, we reject plaintiffs' application of a six-year Statute of Limitations based on a constructive trust theory.
Instead, we agree with Supreme Court that the relief sought in a General Municipal Law § 51 action is in the nature of a penalty or forfeiture created by statute. A "forfeiture" as commonly defined is "the divesting of the ownership of particular property of a person on account of a breach of a legal duty and without any compensation to him" (Webster's Third New International Dictionary 891 [unabridged 1981]; see, Black's Law Dictionary 650 [6th ed 1990]). Plaintiffs allege that the payments to the law firm were illegal and that the County is entitled to reimbursement since Pulver breached his duty as the County's legal officer in failing to secure an opinion from the Comptroller before having the law firm bill for certain work and in engaging in activities which purportedly created a conflict of interest with his public duties. Finding that such allegations fall under the ambit of a "forfeiture", we must next determine whether the three-year Statute of Limitations set forth in CPLR 214 (2) or the one-year Statute of Limitations period of CPLR 215 (4) applies to General Municipal Law § 51 actions.
We give deference to the legislative intent embodied in the exception in CPLR 214 (2) and deem CPLR 215 (4) the applicable Statute of Limitations period. While there is scant case law differentiating the application of CPLR 214 (2) and CPLR 215 (4) with respect to citizen-taxpayer actions, we derive guidance from Court of Appeals precedent pertaining to citizen-taxpayer suits commenced under State Finance Law article 7-A. In Matter of New York State Assn. of Plumbing-Heating-Cooling Contrs. v. Egan ( 65 N.Y.2d 793), CPLR 215 (4) was designated to be the appropriate Statute of Limitations for a citizen suit seeking the return of illegally expended State funds. Not only do we find the analogy to State Finance Law § 123-b actions to be particularly apt, but from a policy standpoint it is clearly warranted. It would be difficult to justify applying a one-year Statute of Limitations to the recoupment of illegal payments premised on State Finance Law article 7-A and a three-year Statute of Limitations to a General Municipal Law § 51 action of a similar nature against a municipal officer. Even though the enactment of General Municipal Law § 51 predates the adoption of State Finance Law article 7-A by more than half a century, both statutes essentially provide taxpayers with a means to redress the waste or improper disposition of public funds.
A synopsis of the legislative history underlying the enactment of State Finance Law article 7-A is set forth in Wein v. Comptroller of State of N.Y. ( 46 N.Y.2d 394).
Therefore, employing a one-year Statute of Limitations period for General Municipal Law § 51 actions will result in a more equitable application of CPLR article 2 where there is no incorporation of a specific Statute of Limitations period in the authorizing statutes. Hence, plaintiffs' claims involving invoice payments shall necessarily be limited at trial to the moneys paid to defendants on or after June 28, 1995 which total $1,687.50. In light of the comparability in the remedy sought in State Finance Law and General Municipal Law taxpayer actions, we decline to follow the First Department's holding that the appropriate Statute of Limitations for a General Municipal Law § 51 taxpayer action alleging waste, illegal gifts and over-billing is three years under CPLR 214 (2) (see,Shechtman v. Sverdrup Parcel Consultants, 226 A.D.2d 268).
Plaintiffs' contention that the doctrine of equitable estoppel acts as a bar to a Statute of Limitations defense is unavailing since the record does not support a finding that plaintiffs were induced by wrongful concealment, deception or misrepresentation in the commencement of their action. To the contrary, the record reveals that a multilevel approval process was employed by the County and the County Legislature reviewed and authorized payment of the vouchers at public sessions. Although Pulver, acting as County Attorney, issued a legal opinion to the County Legislature which underlies this action, it does not necessarily give rise to estoppel even if the opinion was incorrect or mistaken (see, New York City Employees' Retirement Sys. v. Eliot, 267 N.Y. 193, 203; Parsons v. Department of Transp. of State of N.Y., 74 Misc.2d 828, 832). Based on the foregoing, plaintiffs' causes of action not commenced within one year of accrual were properly dismissed by Supreme Court.
We next examine whether plaintiffs were required to show proof of fraud, collusion or motivation by personal gain in order to impose personal liability upon defendants in this taxpayer action. While as a general rule it has been recognized "'that in order to impose personal liability upon a public official pursuant to General Municipal Law § 51, a taxpayer must establish that the official's actions were both illegal and fraudulent, collusive, or motivated by personal gain'" (Matter of Schulz v. Town of Kingsbury, 229 A.D.2d 707, 709,appeal dismissed 89 N.Y.2d 859, quoting Duffy v. Longo, 207 A.D.2d 860, 862, supra), such a showing has been found to be necessary only in cases involving public officials who wrongfully pay public funds to third parties, as distinguished from public officials who receive such funds (see, Thompson v. Hofstatter, 265 N.Y. 54, 65;Stetler v. McFarlane, 230 N.Y. 400, 405; Civil Serv. Empls. Assn. v. Levitt, 52 A.D.2d 100, 106). We concur with Supreme Court's analysis that County Law § 501, adopted in 1950, superseded Local Laws, 1930, No. 1 of County of Greene and Local Laws, 1936, No. 1 of County of Greene.
Plaintiffs must prove at trial, however, that Pulver's conduct violated the provisions of General Municipal Law §§ 51 and 801 and Public Officers Law § 67. Thus, although plaintiffs need not prove fraud, collusion or motivation by personal gain with respect to Pulver, there remain issues of fact pertaining to the alleged statutory violations and whether Pulver received any portion of fees paid to the law firm, thereby precluding plaintiffs' entitlement to summary judgment. With respect to the law firm, Supreme Court properly concluded that plaintiffs failed to demonstrate fraud, collusion or motivation by personal gain sufficient to award judgment as a matter of law.
While the Court of Appeals in Stetler v. McFarlane (supra) specifically found that a public officer "may be charged with the duty of restitution at the instance of a taxpayer though he received [public moneys] without fraud" (id., at 405), we conclude that such is not the case (see, Matter of Schulz v. Town of Kingsbury, 229 A.D.2d 707, 709, supra) for entities or recipients who are not public officials (see, e.g., Matter of Town of Cairo Taxpayers Group v. Town of Cairo, 223 A.D.2d 781, 782, lv denied 88 N.Y.2d 807;Herzog v. Town of Thompson, 216 A.D.2d 801, 804).
Lastly, the causes of action which seek the repayment of legal fees paid by third parties in connection with loan closings involving the Greene County Economic Development Revolving Loan Fund were properly dismissed by Supreme Court on the basis of plaintiffs' lack of standing. This cause of action is not properly redressed in a taxpayer action as the moneys were not the "funds or estate of such county" (General Municipal Law § 51). County taxpayers did not provide the revolving loan funds, which emanated from the US Department of Housing and Urban Development's Small Cities Program, and the legal fees related to the loans were not paid from County tax receipts. Rather, the County merely administered the revolving loan program and, therefore, none of the funds provided to borrowers nor the legal fees paid to defendants originated from the County. Additionally, because plaintiffs have not alleged that they were applicants or borrowers of the loan program, they were not aggrieved by the payments made to other individuals or entities (cf.,Matter of Boyle v. Town of Woodstock, 257 A.D.2d 702, 704, 682 N.Y.S.2d 729, 731).
We have considered the remaining contentions of the parties and have found them lacking in merit or unnecessary to address in view of our decision.
Crew III, Peters and Spain, JJ., concur.
I respectfully dissent.
I do not believe that plaintiffs' General Municipal Law § 51 claim is one "to enforce a penalty or forfeiture created by statute" so as to invoke the one-year limitations period found in CPLR 215 (4). Rather, I would conclude that the action seeks to enforce "aliability, penalty or forfeiture created or imposed by statute" (emphasis supplied) within the meaning of CPLR 214 N.Y.C.P.L.R. (2), providing for a three-year limitations period (see,Shechtman v. Sverdrup Parcel Consultants, 226 A.D.2d 268).
Plaintiffs seek to recover, on behalf of Greene County, funds improperly paid to defendants. Plaintiffs do not seek the imposition of any "penalty" or "forfeiture" as those terms are defined or commonly understood. Black's Law Dictionary defines "penalty" as involving "the idea of punishment * * * for doing some act which is prohibited or for not doing some act which is required to be done" (Black's Law Dictionary 1133 [6th ed 1990]). Nothing in plaintiffs' claim for recoupment of County funds suggests that any punishment be imposed on defendants. A "forfeiture" involves "a divestiture of specific property without compensation" and "imposes a loss by the taking away of some pre-existing valid right without compensation" (Black's Law Dictionary 650 [6th ed 1990] [emphasis supplied]). The concept of forfeiture is antithetical to the very basis of plaintiffs' claim that defendants never had any right to the County funds they received.
Review of the full text of CPLR 215 (4) further supports the conclusion that it has no application to an action of this type. A CPLR 215 (4) action is "given wholly or partly to any person who will prosecute" whereas taxpayer actions require qualifying status. Failing prosecution by a private person, a CPLR 215 (4) action may be commenced "on behalf of the state, within three years after the commission of the offense, by the attorney-general or the district attorney of the county where the offense was committed". This language quite clearly contemplates actions to exact penalties in consequence of the commission of a statutory offense, or to enforce statutorily authorized forfeiture of property (see, e.g., CPLR 1311; Penal Law § 460.30).
Black's Law Dictionary definition of "forfeiture" continues: "Forfeiture of property * * * is one of the penalties provided for under certain federal and state criminal statutes" (Black's Law Dictionary 650 [6th ed 1990]).
To my mind, the gravamen of plaintiffs' claim is that having improperly received County funds, defendants are liable for their return and the present action is one to enforce this liability (see, Hartnett v. New York City Tr. Auth., 86 N.Y.2d 438). In determining the applicability of CPLR 214 (2), "the pertinent inquiry is whether the statute creates a liability 'for wrongs not recognized in the common or decisional law,' and which would not exist but for the statute" (id., at 444, quoting State of New York v. Cortelle Corp., 38 N.Y.2d 83, 86; see,Aetna Life Cas. Co. v. Nelson, 67 N.Y.2d 169, 174; People ex rel. Holland v. Parkway Mobile Homes, 245 A.D.2d 862, 863). The statute under which plaintiffs proceed, General Municipal Law § 51 Gen. Mun., creates a cause of action, unknown at common law, in favor of aggrieved taxpayers for, inter alia, the recovery of funds illegally paid to a county official or other persons acting on behalf of that municipality. As such, it falls squarely within the purview of CPLR 214 (2) as illumined by the analysis in Hartnett v. New York City Transit Auth. (supra).
I believe that the majority also misapprehends the nature of plaintiffs' claim seeking recovery of legal fees paid to defendants in connection with the closing of loans provided under the Greene County Economic Development Revolving Loan Fund. Supreme Court found, and the majority agrees, that as these loans did not involve county funds, and the legal fees for the closing of the loans were paid by private individuals, the funds which defendants received were not County funds recoverable in a General Municipal Law § 51 action. Plaintiffs' claim, however, is that since the duty to close the loans was imposed on defendant George J. Pulver Jr. in his official capacity as County Attorney, the fees paid in connection therewith are rightfully County funds and, thus, properly the subject of a taxpayer action. I believe that plaintiffs' allegations are sufficient to confer standing, and would find that the record presents issues of fact relating to their substantive claims rendering summary judgment inappropriate.
ORDERED that the order is affirmed, with costs.