CITIES -- Powers and Duties (waiver of penalties arising from nonpayment of water rents to compromise a claim)
CLAIMS -- Compromise or Settlement of (waiver of penalties arising from nonpayment of water rents)
GENERAL CITY LAW, §20(1): Under its general authority to compromise or settle claims arising under city contracts, a city may waive the imposition of penalties arising from a property owner's nonpayment of water rents in the context of compromising a claim asserted by the property owner relative to the accuracy of his water bill.
This is in reply to your letter concerning the waiver of penalty charges arising from the nonpayment of water rents. You indicate that the city's code provides for the imposition of a penalty of 10% on any water bill not paid within thirty days after the due date. We understand that the code also provides for partial payment of past due water rents and that uncollectible water rents become a lien on real property and are added to the user's city tax bill.
Under the city's water rent schedule, most residences, including apartments, are charged a flat fee every six months, but an apartment in which there is only one resident is charged one-half of the flat fee. The city determines the number of residents from forms filed by property owners. You state that an owner of an apartment complex in the city has challenged the accuracy of his water bill on the basis that there are fewer residents in the apartments than are reflected on the city's records. The owner has refused to pay his water bill pending the resolution of the dispute. You inform us that the unpaid water rents have not yet been relevied with the city taxes. You inquire whether the city, in the context of settling this dispute, may waive the imposition of the penalties.
Section 20(1) of the General City Law authorizes a city "[t]o contract and be contracted with and to institute, maintain and defend any action or proceeding in any court." The authority provided by this section includes the power to compromise claims arising under a city's contracts (see City of Mount Vernon v Mount Vernon Trust Co., 270 NY 400, 1 NE2d 825). Moreover, it has been held that the courts favor the compromise of claims and that municipal authorities are not prohibited from settling cases if they act with competent authority, in good faith, and for sufficient consideration (Radinsky v City of New York, 133 NYS2d 540; O'Brien v Mayor Etc., of the City of New York 25 Misc 219, 55 NYS 50, affd 40 App Div 331, 57 NYS 1039, 160 NY 691). There is sufficient consideration for the compromise of a claim if the parties in good faith advance opposing contentions, although the claim be without legal validity and incapable of enforcement (O'Brien v City of New York, supra; see also City of Rochester v Chiarella, 121 Misc 2d 257, 467 NYS2d 948, affd 98 AD2d 8, 470 NYS2d 181). The consideration each party receives under a compromise is not the sacrifice of a right, but the settlement of the dispute and the abandonment of the claim. The prevention of litigation is not only a sufficient, but a highly favored consideration (Dovale v Ackerman, 11 Misc 245, 33 NYS 13). Although a municipality has the authority to compromise a claim against it, "it may not, under the guise of a compromise, impair a public duty owed by it or give validity to a void claim" (Andgar Associates, Inc. v Board of Zoning Appeals of Incorporated Village of Port Washington North, 30 AD2d 672, 291 NYS2d 991 ).
In view of the foregoing, it is our opinion that the city, in the context of a compromise of a claim asserted by the property owner, may waive the imposition of the penalties arising from the property owner's failure to pay water rents (cf. 1986 Opns St Comp No. 86-87, p 133, in which we concluded that a taxpayer cannot avoid payment for past water services and late payment penalties under circumstances where the property owner failed to receive a water bill and took no action to see that the bills were rendered and paid). Although this Office is of the opinion that the city is legally authorized to enter into a compromise of the type described, we offer no opinion as to the propriety of a compromise in this instance. Rather, it is the responsibility of the city to evaluate the property owner's claim to determine whether a compromise is warranted.
February 22, 1988