102 A.D. 336 | N.Y. App. Div. | 1905
The defendants appeal from an order of the Special Term continuing a temporary injunction pendente lite, granted in a taxpayer’s action brought by the plaintiff to restrain the audit and payment of certain bills for gas and electric lighting in excess of eighty and sixty per cent of the face thereof respectively. The order is challenged in this court upon the ground that the moving papers contain no statements of facts upon which fraud, had faith or illegal, corrupt or dishonest conduct can be predicated, while the respondent insists, first, that the action can be maintained without such proof; second, that there is proof of bad faith; and, third, that the proposed payment is illegal, and, therefore, can be enjoined, irrespective of the motive of the officer proposing to make i't. •
The rule as established by Talcott v. City of Buffalo (125 N. Y. 280) and Ziegler v. Chapin (126 id. 342), that the action authorized by section 1925 of the Code of Civil Procedure and by chapter 301 of the Laws of 1892 cannot be maintained without proof of fraud, collusion, corruption or bad faith or illegality, has been uniformly followed by the courts of this State. But the respondent insists that section 59 of the Greater New York charter (Laws of 1901, chap. 466) is broader than the General Taxpayers’ Act, and authorizes the action without proof of fraud or bad faith. That section is as follows: “ The board of aldermen and the several members thereof and all officers and employes of the city are hereby declared trustees of the property, funds and effects of said city respectively, so far as such property, funds and effects are or may be committed to their management or control, and every person residing in said city, when authorized to pay taxes therein, and who shall pay taxes therein, is hereby declared to be a cestui que trust in respect to the said property, funds and effects, respectively; and any co-trustees, or any cestui que trust, shall be entitled, as against said trustees, and in regard to said property, funds and effects, to all the rights and privileges provided by law for any co-trustee or cestui que trust to prosecute and maintain any action to prevent waste arid injury to any property, funds and estate held in trust. Such trustees are hereby made subject to all the duties and responsibilities imposed by law on trustees, and such duties and responsibilities may be
It is argued that this statute requires the courts to control the official acts of the administrative officers of the city of New York precisely to the same extent as the acts of any trustee may be controlled. The jurisdiction of courts of equity over trusts is inherent; a trustee in a proper case may ask the advice of the court; in the absence of a trustee the court will even take upon itself the execution of the trust, and yet a court of equity cannot interfere with the discretion of a trustee when exercised within fair and reasonable limits unless there is fraud, bad faith, or some peculiar reason calling for its intervention. (Mason v. Jones, 3 Edw. Ch. 497; Ireland v. Ireland, 84 N. Y. 321.) And it has been held that the courts will not interfere with the discretion of the directors of a private corporation at the instance of its stockholders unless the corporate powers have been illegally or unconscientiously executed, or unless it be made to appear that the acts complained of were fraudulent or collusive, and destructive of the rights of the stockholders; and that mere errors of judgment are not sufficient as grounds of equity interference. (Leslie v. Lorillard, 110 N. Y. 519; Burden v. Burden, 159 id. 287; Hennessy v. Muhleman, 40 App. Div. 175.) The history of the two statutes shows their purpose to have been the same. The special act applicable to New York city was first enacted by section 3 of chapter 405 of the Laws of 1864, the general act by chapter 161 of the Laws of 1872. Both were undoubtedly the result of the decision in Roosevelt v. Draper (23 N. Y. 318), which held that a taxpayer could not maintain an action to restrain or avoid a corporate act not affecting his private interest as distinct from that of other inhabitants. While the act of 1864 has been re-enacted by the Consolidation Act (Laws of 1882, chap. 410, § 101) and the present charter (svprd), it is significant that no decision can be found even suggesting that greater powers were conferred by it than by the general act, and in the case of Knowles v. City of New York (176 N. Y. 430) the Court of Appeals, in affirming a judgment sustaining a demurrer in a taxpayer’s action, placed its decision upon the ground that the complaint did not allege facts showing that the acts questioned were either illegal or fraudulent.
The complaint alleges on information and belief that the defendants “ in violation of law, in disregard of their duties to the public, and in bad faith, have agreed with one another and with the aforesaid companies to pay to said companies the entire amount of the bills rendered. * * * That the payment of the. said bills would be a waste of more than $1,200,000 of the public funds of the city of New York, would be a fraud upon the public and illegal.” These are allegations of conclusions and not issuable facts. (Knowles v. City of New York, supra; Kittinger v. Buffalo Traction Co., 160 N. Y. 377; Barhite v. Home Tel. Co., 50 App. Div. 25; Wallace v. Jones, 83 id. 152.) A brief recital of the facts is, therefore, necessary.
In .December, 1902, the commissioner of water supply, gas and electricity advertised for and received bids for gas and electric lighting for the year 1903; said bids were neither accepted nor rejected, but were referred by him to the board of estimate and apportionment, of which the defendant Grout was a member; upon the report of a committee of which the defendant Grout was a member the board, in December, 1903, adopted a resolution in accordance with which all of said bids, except one, were rejected by the commissioner as unreasonably high; the companies submitting said bids were then furnishing, and during the year 1903 before the rejection of the bids and thereafter continued to furnish to the city gas and electric lighting and to render monthly bills therefor upon the basis of said bids, which the comptroller refused to audit, offering, however, to allow sixty and eighty per cent of the gas and electric light bills respectively, without prejudice to the contention of the city and the companies, which offer was accepted by a few, but rejected by most of the companies. Meanwhile the commissioner advertised for bids for the year 1904; the same companies submitted bids at practically the same rate, and in October, .1904, the com
Broad power to settle and adjust claims is conferred on the comptroller by section 149 of the charter, in the following language: “He shall settle and adjust all claims in favor of or against the corporation, and all accounts in which the corporation is concerned as debtor or creditor; but in adjusting and settling such claims he shall, as far as practicable, be governed by the rules of law and principles of equity which prevail in courts of justice.”
The rule has never been questioned, so far as I am aware, that so long as an auditing officer keeps within his jurisdiction and acts in good faith, no matter what errors of judgment he may commit, his audit is not the subject of collateral attack, and no fact is alleged inconsistent with good faith on the part of the comptroller. It may be that he acted imprudently and unwisely ; it may be that he was mistaken in the assumption that the companies could recover interest, as counsel for the respondent learnedly argues; he may have been wrong in thinking that the price charged private consumers established a market price; he may have erred in thinking that the so-called Oakley contract for 1904 was an admission by the city of the value of the service; he may have erred in supposing that the acceptance of the service without rejecting the bids precluded the city from questioning the amount charged ; but if these were errors, they were errors of judgment, not the subject of review in a taxpayer’s action.
The mere fact that the price proposed to be paid is excessive does not necessarily warrant the inference of bad faith; the comptroller
Had the complaint alleged facts tending to establish that, knowing and believing that to the extent claimed said bills were not a legal or proper charge against the city, and could not be recovered by the claimants in any action or proceeding that could be brought for the purpose, and that said proposed settlement was disadvantageous to the city, the defendants had, nevertheless, collusively conspired to make such payments for the purpose and with the intent of unlawfully diverting the money of the city to the use of said claimants, and of enabling them to make an unlawful profit to the detriment of the city, a different situation would have been presented.
The argument that the proposed payment is illegal is based upon the assertion that to the extent of forty per cent of the electric lighting bills, and twenty per cent of the gas lighting bills, it is a gratuity. This argument begs the question. The statute makes the judgment of the auditing officer controlling in determining the question in the first instance. He is required to examine the matter, exercise his judgment, and determine it. The court cannot substitute its judgment for his. Instead of being illegal, his proposal to audit the bills was in the strict line of his duty. Had he refused to act, mandamus to compel action would have been a proper remedy, but no one will pretend that in such a proceeding the court would direct what the audit should be, no matter how clear the proof upon the subject, and yet we are asked to restrain him from performing an act, performance of which could be compelled but not controlled, unless he does it in a sjiecified manner,
My conclusion is that, upon the undisputed facts disclosed by the record before us, the motion to continue the injunction should have been denied. 'The order appealed from should, therefore, be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.
Hirsohberg-, P. J., Bartlett and Woodward, JJ., concurred; Hooker, J., not voting.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.