Leirer v. Caputo

181 A.D.2d 119, 586 N.Y.S.2d 976, 1992 N.Y. App. Div. LEXIS 8564

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: June 22, 1992
• Status: Published

Opinions

OPINION OF THE COURT

Sullivan, J.

In the present appeal, we are called upon to determine whether the appellant Comptroller of the County of Suffolk possesses 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. We conclude that the Comptroller has such authority.

I.

The petitioner is employed as the Senior Deputy County Clerk of Suffolk County, a position she has held since April 1985. Based on alleged reports that the petitioner was frequently absent from her worksite, the Comptroller conducted an on-site audit of the petitioner’s work attendance from September 1, 1987, through January 8, 1989. By letter dated May 9, 1989, the Comptroller’s office sent the petitioner a copy of the final audit report. Copies were also filed with all County legislators, as required by Suffolk County Charter article V. The final audit report found that the petitioner had been absent without authorization for a total of 665 hours, and thus had received an overpayment of $13,614.90 in unearned wages. The conclusion in the report was that the petitioner should repay her unearned wages to the County, and directed her to sign a confession of judgment in the sum of $13,614.90. It is undisputed that when the petitioner refused to sign the confession of judgment, the Comptroller began withholding $200 from each paycheck, or 10% of the petitioner’s salary, from May 28, 1989, pursuant to the recommendation of the audit report.

The petitioner commenced the instant proceeding pursuant to CPLR article 78, seeking a judgment pursuant to CPLR 7803 (2) prohibiting the appellants from recouping moneys from her paychecks and declaring that the withholding of her wages without prior judicial approval was unconstitutional and unlawful. The Supreme Court determined, inter alia, that the appellants had acted in excess of their jurisdiction, and therefore granted the petitioner’s request for relief in the nature of prohibition. Additionally, the court converted the petitioner’s request for declaratory relief into a plenary declaratory judgment action, severed the appellants’ counterclaim for $13,614.90, and directed that the counterclaim be continued as part of the declaratory judgment action. Upon reargument and renewal, the court adhered to that determination.

The court’s finding that the Comptroller acted in excess of his jurisdiction was premised upon its finding that the Comptroller had no authority to withhold wages for recoupment because neither the Suffolk County Charter nor any other legislative enactment expressly confers such power upon him. Moreover, the court reasoned that the recoupment was improper because the Comptroller did not comply with certain provisions of the Charter and did not obtain legislative approval for the implementation of the recoupment plan. We disagree.

II.

Admittedly, there is little decisional law upon which to draw in resolving the instant controversy. Nevertheless, a limited body of cases proves instructive with regard to the issue of recoupment. Chief among these is Matter of Carlon v Regan (98 AD2d 544, mod 63 NY2d 1011). In that case, the petitioner recovered a substantial damage award against the State of New York. The State Comptroller subsequently asserted a setoff against that award in order to recoup public funds which had been expended for unrelated mental health care and treatment of the petitioner. The petitioner commenced a proceeding to compel the payment of the award in full, but the Appellate Division, Third Department, dismissed the petition, finding that while no provision of the Mental Hygiene Law "expressly or implicitly authorizes the Comptroller to use a setoff for the purpose of collecting fees * * * the Comptroller possesses the authority to do so as a function of his constitutional and statutory duty to audit all vouchers before payment” (Matter of Carlon v Regan, 98 AD2d 544, 546, supra). The court observed that "[t]he Comptroller had not only the authority, but also the duty, to make the setoff” (Matter of Carlon v Regan, supra, at 547), and further noted that the petitioner’s recourse was to commence a proceeding pursuant to CPLR article 78 to review the Comptroller’s audit of the amounts expended on his behalf. On appeal, the Court of Appeals modified the amount of the setoff but otherwise agreed in all respects with the reasoning in the decision of the Appellate Division (see, Matter of Carlon v Regan, 63 NY2d 1011, supra).

The authority to recoup grows out of the recognized principle that public moneys which are erroneously or mistakenly paid out must be recoverable. Indeed, it is well settled that “[t]here exists a strong, defined public policy of this State to recover public funds improperly received” (Matter of Cortlandt Nursing Home v Axelrod, 66 NY2d 169, 182, cert denied 476 US 1115; see, Matter of Couch v Perales, 78 NY2d 595; Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30; Matter of Shufelt v Beaudoin, 116 AD2d 422). Hence, in Matter of Daleview Nursing Home v Axelrod (supra, at 33), the Court of Appeals permitted the Commissioner of Health of the State of New York to recoup overpayments of Medicaid reimbursements made to a nursing home by reducing future reimbursements, observing that there is a "common-law right of action * * * long recognized in this State * * * to recover an overpayment of governmental moneys”. Similarly, in Matter of Shufelt v Beaudoin (supra), a case involving the erroneous overpayment of a shelter allowance to a public assistance recipient, the Commissioner of the Rensselaer County Department of Social Services proceeded to recover an overpayment by reducing the recipient’s monthly public assistance grant. In upholding the Commissioner’s action, the Appellate Division, Third Department, noted that the strong public policy favoring the recovery of improperly received public funds "provides ample and legitimate justification for the concept of recoupment” (Matter of Shufelt v Beaudoin, supra, at 425). The same reasoning was employed in Matter of Mayflower Nursing Home v Office of Health Sys. Mgt. (88 AD2d 192, affd 59 NY2d 935), where, following an audit, certain Medicaid reimbursements were withheld from a nursing home in order to recover for rental subsidy overpayments which the nursing home had received. Finding that the policy of recovering public funds was paramount, the Appellate Division, Third Department, found that "errors by State employees cannot bind the State or prevent recoupment of unauthorized payments” (Matter of Mayflower Nursing Home v Office of Health Sys. Mgt., supra, at 196).

The appellant County of Suffolk, by virtue of its status as a governmental entity, shares this strong public policy. Likewise, as the County’s chief fiscal officer, the Comptroller has been charged with the statutory duty, inter alia, to "certify the correctness of payrolls for the payment of salaries of officers and employees paid from county funds” (County Law § 577 [1] [i]).¹ Moreover, the Suffolk County Charter requires that, among other obligations, the Comptroller must "[examine, audit and verify all books, records and accounts kept by the various administrative units, departments, offices or officials paid from county funds” and "[a]udit and approve all bills, invoices, payrolls and other evidences of claims, demands or charges against the county * * * and determine the regularity, legality and correctness of the same” (Suffolk County Charter, art V, § C5-2 [B], [E]). Contrary to the conclusion of the Supreme Court and our dissenting colleague, the Comptroller did not need express legislative authority in order to recoup the funds at issue in this case. Rather, he possesses the inherent common-law authority to formulate and implement a plan of recoupment as a function of his constitutional and statutory duties. Accordingly, we find that in order to fulfill the foregoing duties, and consonant with his continuing obligation to safeguard the public fisc, the Comptroller has a common-law right to recoupment which is to be exercised when an audit reveals the erroneous or improper payment of public funds (see, Matter of Carlon v Regan, 63 NY2d 1011, supra).2

We are cognizant of the fact, accurately noted in the dissent, that none of the foregoing decisions involved an attempt to recoup purported salary overpayments. Nevertheless, we cannot so easily dismiss their relevance to the matter before us on this basis. By focusing upon the broad powers which the Comptroller possesses with respect to fiscal matters, reaffirming the common-law right of recoupment, and emphasizing the policy interest in recovering improperly disbursed public funds, these decisions support our conclusion in this case that the Comptroller acted within his authority in implementing a plan of recoupment to recover the allegedly improper salary payments. Inasmuch as our courts have upheld the recoupment of improperly received governmental moneys from such varied funds as tort awards (see, Matter of Carlon v Regan, supra), Medicaid reimbursements (see, Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30, supra; Matter of Mayflower Nursing Home v Office of Health Sys. Mgt., 88 AD2d 192, supra), and even AFDC grants and public assistance grants (see, Matter of Couch v Perales, 78 NY2d 595, supra; Matter of Shufelt v Beaudoin, 116 AD2d 422, supra), there is no basis for concluding that wages or salaries are immune from a plan of recoupment which otherwise complies with statutory mandates (see, CPLR 5231).

Conversely, the lone salary recoupment case mentioned by the parties is factually inapposite to the instant controversy. In Matter of Feinberg v Board of Educ. (74 Misc 2d 371, affd 51 AD2d 548), the petitioner employee challenged the withholding of his entire salary as a substitute teacher in order to recoup vacation pay which he allegedly had received in error. The trial court denied a motion to dismiss the proceeding, reasoning that "[t]o sanction * * * a practice that permits withholding of all of an employee’s earnings violates our legislative and judicially declared public policy” (Matter of Feinberg v Board of Educ., 74 Misc 2d 371, 372, supra [emphasis supplied]). Indeed, a fair reading of that decision leads to the ineluctable conclusion that the court found fault not with the concept of recoupment, but with the implementation of a recoupment plan in that case which deprived the employee of his total wages and thereby conflicted with the express policy of New York State (see generally, CPLR 5231; Labor Law § 193; but see, Labor Law § 190 [3]). This was made clear by the decision of this court affirming the judgment, in which we observed that "there is no authority to support [the] method of recoupment” which was employed therein (Matter of Feinberg v Board of Educ., 51 AD2d 548, supra [emphasis supplied]). This critical distinction between the power to recoup in general and the utilization of a specific plan whereby that power is exercised in a given case was observed in Salling v Koch (115 Misc 2d 514). There, the City of New York engaged in the recoupment of salary overpayments pursuant to the parties’ collective bargaining agreement by withholding a small percentage of each affected employee’s paycheck until the full amount was recovered. The court held that the limited reduction in wages was not invalid merely because it was not preceded by a hearing. Moreover, the court distinguished the decision in Matter of Feinberg (supra) by noting that "[i]n Feinberg, it was the manner of the retaking rather than the right to recoup that was found to be offensive” (Salling v Koch, supra, at 517 [emphasis supplied]). Inasmuch as the Comptroller in the instant case is currently recouping funds by withholding an acceptable and lawful percentage of the petitioner’s salary (see generally, CPLR 5231), the decision in Matter of Feinberg (supra) poses no impediment to his actions.

III.

Notwithstanding the foregoing, both the petitioner and our dissenting colleague maintain that the Comptroller failed to comply with the procedural requirements of the Suffolk County Charter, thereby rendering the recoupment plan invalid. However, the provisions of the Charter simply fail to support this assertion.

A review of the relevant provisions of the Suffolk County Charter demonstrates that they do not limit or negate the Comptroller’s common-law right of recoupment. While the Charter requires that a copy of each audit report be filed with all County legislators within 30 days of its completion (see, Suffolk County Charter, art V, § C5-4 [A]), the evidence before us establishes that the Comptroller complied with this provision, and the Supreme Court’s finding to the contrary is unsupported by the record. Furthermore, the Supreme Court’s determination that Suffolk County Charter article V, § C5-4 (B) and (C) mandate prior legislative approval of audit recommendations before the Comptroller may implement them finds no support in the text of those Charter provisions. Rather, those provisions read as follows:

"B. Within ninety (90) days after public release of such audit by the Department of Audit and Control or by any independent auditor on behalf of the County of Suffolk, the department head or elected official in charge of the department, agency, board or other governmental entity which was the subject matter of such audit shall appear before the committee of the Suffolk County Legislature having primary jurisdiction over such department, agency, board or governmental entity for the purpose of explaining what actions have been taken to implement the recommendations, if any, of said auditor. If no steps have been taken to implement such recommendations or if no such recommendations have been implemented, then such department head or elected official shall give an explanation as to why such recommendations have not been implemented.

"C. The Chairman of the pertinent legislative committee shall schedule such hearings as shall be necessary to fully explore and evaluate the results of such audits and the status of such recommendations and suggestions”.

The clear import of the foregoing provisions is to require only that the official in charge of the governmental entity which is the subject of the audit (in this case, the County Clerk of Suffolk County) appear before a legislative committee within 90 days after public release of the audit in order to report on the actions which have been taken to implement the audit recommendations, and that the chairperson of the committee shall schedule such hearings on the matter as may be necessary. There is no express language impeding the Comptroller’s common-law authority to recoup public funds. Indeed, the provisions clearly contemplate that some action will be taken to implement the audit recommendations prior to any involvement on the part of a legislative committee. Hence, we find that these Charter provisions do not mandate legislative approval before the Comptroller can exercise his common-law authority to implement a recommended plan of recoupment. Likewise, any failure on the part of County officials to comply with either of these provisions does not serve to divest the Comptroller of this authority, and the arguments in the dissent to the contrary misinterpret the plain meaning of the provisions. Accordingly, the Comptroller neither supplanted the pertinent legislative committee nor violated the express procedures of the Charter. Rather, he acted in accordance with it by filing copies of the audit with the pertinent legislators and then implementing his recommendations. That the County Clerk and the Legislature may not have performed their duties of exploring this implementation of the recommendations does not invalidate retroactively the Comptroller’s lawful actions.

IV.

The petitioner further claims that the existence of a factual dispute regarding the amount of money owed precludes the Comptroller from implementing the plan of recoupment. She maintains, and our dissenting colleague agrees, that she was deprived of due process because she never received any meaningful opportunity to contest the Comptroller’s findings and his actions. The contentions are unavailing. The petitioner was afforded the opportunity to submit evidence of her work attendance to the Comptroller and she in fact attended conferences with and submitted documentation to him in an attempt to resolve the matter prior to the issuance of the disputed audit. Having failed to persuade the Comptroller of the correctness of her position, the petitioner was not without an appropriate remedy. Indeed, it is well settled that where an individual believes that the figures set forth in an audit and the procedures employed in its preparation are erroneous, her recourse is to seek review of the audit pursuant to CPLR 7803 (3) (see, Matter of Carlon v Regan, 98 AD2d 544, supra; Board of Educ. v State of New York, 88 AD2d 1057, affd 60 NY2d 716). However, the petitioner expressly withdrew all claims for relief under CPLR 7803 (3), and as the "wherefore” clause of her amended and supplemental verified petition dated July 14, 1989, makes clear, limited her remedies to relief in the nature of prohibition under CPLR 7803 (2), and a declaration that the Comptroller exceeded his authority and acted illegally. Hence, the petitioner elected to limit the scope of this proceeding by challenging only the power and authority of the Comptroller.

We further find that, inasmuch as the issue presented is solely one of law, the court should have declared the rights of the parties. Given the Comptroller’s role as chief fiscal officer of the County and his common-law power and duty to recoup public moneys, we find that due process did not require him to commence a plenary action or to await a judicial determination before exercising his authority. Accordingly, we declare that the recoupment in this case was rendered neither unconstitutional nor illegal by reason of the fact that it was not preceded by legislative or judicial approval.

Additionally, we note that while the appellants have asserted a counterclaim to recover the balance of the funds which allegedly were paid erroneously to the petitioner, the record before us does not contain adequate factual evidence to resolve the disputed claim. Accordingly, the appellants’ counterclaim is severed and continued as an action at law to recover public funds.

Finally, the petitioner’s claims that the Comptroller’s actions are prompted by bad faith and constitute a political vendetta are irrelevant to our determination of this appeal. The issue before us is limited solely to whether the Comptroller acted lawfully and within his authority in implementing the challenged plan of recoupment.

Accordingly, the appeal from the judgment is dismissed, as the judgment was superseded by the order, made upon reargument and renewal, and the order is reversed insofar as reviewed, on the law, the first, third, fourth, and fifth decretal paragraphs of the judgment are vacated, that branch of the proceeding which was to prohibit the appellants from recouping moneys from the petitioner’s wages is dismissed on the merits, that branch of the proceeding which was for declaratory relief is granted to the extent that it is declared that the appellants’ recoupment of moneys from the petitioner’s wages without prior judicial approval is neither unconstitutional nor unlawful, and the appellants’ counterclaim is severed and continued.

1 . There can be little argument that the Comptroller could have refused to certify payment to the petitioner if he had been aware of the petitioner’s absences from work when the payrolls were submitted.

2 . Despite the Ciceronian posture of the dissent, the question of political motivation appears to be irrelevant and inapt. The Comptroller either has the right to recoup money improperly paid to "no-show” public employees or he does not.