Municipal Official Whose Appointment Was Ultra Vires and Void Must Disgorge the Pay He Received

City Council of the City of Orange v. Edwards, 455 N.J. Super. 261 (App. Div. 2018).  Willis Edwards III, the subject of today’s decision by Judge Currier, is a former member of the New Jersey Legislature, a professor who has taught government and public administration, and the holder of a dual master’s degree in finance and business management.  The then Mayor of Orange appointed Edwards as Deputy Business Administrator of the City.  That followed the Mayor’s attempt to appoint Edwards as Business Administrator, an action that the City Council, which was required to approve under the form of government under which Orange is constituted, refused to confirm.  By statute and local ordinance, the Mayor had no power to appoint a deputy; only a department head could do that.  Nonetheless, Edwards remained in the position and drew his pay.

The Council filed this suit to enjoin Edwards from continuing as Deputy Business Administrator.  The suit also named the Mayor, but he was later dismissed.  The Law Division initially granted the Council’s request for an order to show cause, but thereafter a different judge granted reconsideration and vacated the order to show cause because the first judge had not taken testimony before ruling.  Edwards then resumed his position.  But a provision of the original order requiring the City “to comply with the statute’s regulations concerning the appointment of a deputy director remained in effect.”

A few days before the matter was to be fully tried, Edwards resigned from the position and claimed that the case was moot.  The trial judge reserved decision on the mootness issue, and a bench trial proceeded.  The result was a ruling that the appointment of Edwards was ultra vires and that he had to disgorge the salary that he had collected.  He appealed, but today the Appellate Division affirmed, applying the relatively deferential standard of review that applies to bench trials.

Edwards asserted that his appointment was not ultra vires, or that if it was, the Council ratified the appointment by approving budgets that included his salary.  Judge Currier was not impressed with those arguments.  She provided a careful discussion of the doctrine of ultra vires, noting that there are two types: “ultra vires in the primary sense,” which encompasses “acts utterly beyond the jurisdiction of a municipal corporation” that are inherently void, and “ultra vires in the secondary sense,” which consists of the “irregular exercise of a basic power under the legislative grant in matters not in themselves jurisdictional.”

The appointment of Edwards, Judge Currier concluded, in agreement with the Law Division, was ultra vires in the primary sense.  By statute and municipal ordinance, the Mayor had no power to appoint Edwards as Deputy Business Administrator.  That power lay only with the department director.  The Mayor had made that appointment to circumvent the Council’s rejection of the appointment of Edwards as Business Administrator.  “As there was no authority for defendant to serve in the deputy position, the mayor’s appointment of a deputy was an illegal act– an act that was ultra vires in the primary sense and, therefore, void.”

Edwards claimed that he had taken the Deputy Business Administrator in good faith, and in the belief that the Mayor had the power to appoint him.  Judge Currier found that assertion “disingenuous.”  Edwards, she observed, “is a highly educated man who had served in the state legislature and taught college courses in municipal government and public administration.”  He had also reviewed the statutes and ordinances that pertained to his employment.  He knew better than to think that the appointment was authorized.

Nor could he claim surprise at the Council’s position.  The Council sued him, and he was in court for the order to show cause hearing.  Thus, there was no ratification by the Council.  “The filing of a lawsuit to enjoin his continued employment is more than sufficient to defeat [the ratification] argument.”  And since the budgets did not contain particular line items for particular salaries, including his, their passage did not constitute ratification.

Edwards also relied on the de facto officer doctrine.  As Judge Currier described it, the doctrine “recognizes the validity of actions undertaken by a person who acted in a legally non-existent position.”  That principle is necessary to protect innocent third parties who rely on the actions of such persons.  Edwards was a de facto officer, both the Law Division and the Appellate Division found, but that did not mean that he was entitled to keep his salary.  A de factor officer can be compensated when he or she acts in good faith.  But Edwards was found not to have acted in good faith.  “[T]he record is replete with evidence of defendant’s awareness of his unlawful employment.”

The lack of good faith also doomed Edwards’s reliance on the equitable doctrines of quantum meruit and and equitable estoppel.  Given his bad faith, disgorgement, which Judge Currier stated is “a harsh remedy and one to be used sparingly,” was eminently appropriate here.  In no uncertain terms, she noted Edwards’s “blatant disregard for the law” and his “flagrant contempt for the citizens of the City and the law.”  Since his actions were “inexcusable,” the “sole remedy to make the aggrieved taxpayers whole is to disgorge defendant of the monies paid to him during his service in the unlawful employment.”