Copeland v. Salomon

• Citation: 451 N.Y.S.2d 682,436 N.E.2d 1284,56 N.Y.2d 222
• Decision Date: 20 May 1982
• Docket Number: No. 1,1
• Parties: , 436 N.E.2d 1284 James COPELAND et al., Appellants, v. Abraham SALOMON, Respondent. (Action) (And Another Action.)
• Court: New York Court of Appeals Court of Appeals

Page 682

451 N.Y.S.2d 682

56 N.Y.2d 222, 436 N.E.2d 1284

James COPELAND et al., Appellants, v. Abraham SALOMON, Respondent. (Action No. 1.)

(And Another Action.)

Court of Appeals of New York.

May 20, 1982.

James L. Fischer, New York City, Selwyn Karp, Stephen N. Silver, Far Rockaway, and John Diaconis, New York City, for appellants

Jay Edmond Russ, Massapequa, for respondent.

OPINION OF THE COURT

MEYER, Judge.

Neither the failure to obtain permission from the court which appointed a receiver in mortgage foreclosure to begin an action against him for personal injury incurred by plaintiff during his receivership, nor the fact that prior to service of the summons and complaint the receiver had been permitted to resign subject to an accounting and application for discharge being made by him and a substitute receiver appointed, constitutes a jurisdictional defect barring maintenance of the action. The order of the Appellate Division, 81 A.D.2d 824, 438 N.Y.S.2d 599, should, therefore, be reversed, with costs, and the orders of Special Term, 103 Misc.2d 611, 426 N.Y.S.2d 699 should be reinstated.

By order dated June 19, 1975, made in an action to foreclose a first mortgage on the premises known as 1502 Mott Avenue, Far Rockaway, New York, defendant Salomon was appointed receiver of rents and profits. The order authorized the receiver to keep the property in repair, no repair costing more than $500 to be made except by order of court made on notice. On November 29, 1975, plaintiff James Copeland, a tenant in the building, was injured while using the common stairway of the building. By summons and complaint dated May 3, 1976, Copeland and his wife began an action against Salomon to recover for the injury and for loss of consortium. The complaint alleged that defendant was acting in his official capacity as receiver on November 29, 1975, and that plaintiff had been injured by reason of defendant's negligence.

Although defendant was the receiver on November 29, 1975, he sought permission to resign by motion dated January 30, 1976. By order dated February 17, 1976, defendant was permitted to resign, directed to file and obtain confirmation of his accounts and to "apply * * * for his discharge as such Receiver" and a successor receiver was appointed. What the status of the receivership presently is does not appear from the record, but by order entered October 6, 1976, defendant Salomon's accounts were approved and he and his surety were "discharged and relieved from all liability to any person, partnership, association and corporation as to all matters embraced in the * * * Receiver's account." No answer was served on behalf of defendant until February 18, 1977, when a pro forma answer was served, which admitted by failing to deny Salomon's status as receiver at the time of James Copeland's injury and control of the stairway on which he was injured, and asserted but one affirmative defense (of culpable conduct on plaintiff's part). After the matter had been assigned to a Trial Part and a jury selected, however, defendant's attorney moved before the Trial Judge to dismiss for want of jurisdiction.

The case was then returned to Special Term for consideration of the jurisdictional question. Special Term by order of May 20, 1980, stayed the action but denied defendant's motion to dismiss without prejudice to renewal should plaintiffs fail to move within 30 days in the receivership proceeding for appropriate relief. Plaintiffs then moved in the latter proceeding for leave to sue Salomon as receiver and to vacate the order discharging him. The moving affidavit stated and defendant, though disputing its relevance, has not denied that the summons and complaint were forwarded to the insurance carrier whose liability policy covered both the owner and the receiver. By order dated July 22, 1980, the motion was granted to the extent of vacating the order discharging Salomon as receiver with respect to plaintiffs' action, granting plaintiffs leave to sue, amending the title to show that Salomon was being sued "as receiver," and vacating the stay.

The Appellate Division held that plaintiffs' failure to comply with the condition precedent that leave be obtained prior to suit was jurisdictional and not curable by an order nunc pro tunc. It, therefore, reversed, on the law, the orders appealed from, granted the motion to dismiss the personal injury action and denied the foreclosure action application for leave to institute the personal injury action. We conclude that (1) plaintiffs' failure to obtain leave of the foreclosure court prior to institution of this personal injury action was not jurisdictional; (2) Salomon was sued and was liable in his official capacity, was obliged as an officer of the court to set forth plaintiffs' claim as a contingent liability in his accounting to the foreclosure court and to give plaintiffs notice of that accounting and moreover, under the limited language of the order of October 6, 1976, has never been discharged as to that claim; and (3) in any event, Special Term had the authority to make the order of July 22, 1980 in the receivership proceeding vacating Salomon's discharge as to plaintiffs' claim and granting them leave to sue, and under the circumstances of this case it would have been an error of law not to do so. We, therefore, reverse and reinstate the Special Term orders appealed from.

I

We have previously noted the confusion that arises because the word "jurisdiction", which with respect to subject matter means the power of a court to adjudicate concerning a category of cases, is also inexactly used to refer to the situation in which the absence of a condition precedent requires dismissal of a particular case notwithstanding that the court has jurisdiction of the subject matter (Nuernberger v. State of New York, 41 N.Y.2d 111, 117, 390 N.Y.S.2d 904, 359 N.E.2d 412; Thrasher v. United States Liab. Ins. Co., 19 N.Y.2d 159, 166, 278 N.Y.S.2d 793, 225 N.E.2d 503). Generally, though not necessarily, the condition is statutory in origin (Salesian Soc. v. Village of Ellenville, 41 N.Y.2d 521, 526, 393 N.Y.S.2d 972, 362 N.E.2d 604 Thrasher v. United States Liab. Ins. Co., 19 N.Y.2d 159, 166, 278 N.Y.S.2d 793, 225 N.E.2d 503, supra ). The omission of such a condition does not necessarily bar the claim entirely. If no time limit for compliance with the condition is established, or the established time limit is still open, or CPLR 205 operates because of the defectively commenced action to extend the time limit, the omission can be supplied and the action or a new action replacing it will be decided on the merits (e.g., Carrick v. Central Gen. Hosp., 51 N.Y.2d 242, 434 N.Y.S.2d 130, 414 N.E.2d 632; George v. Mt. Sinai Hosp., 47 N.Y.2d 170, 417 N.Y.S.2d 231, 390 N.E.2d 1156).

The power to appoint a receiver in foreclosure proceedings, though now touched upon by RPAPL 1325 (see, also, CPLR art. 64), stems not from statute but from the inherent powers of the Court of Chancery (Hollenbeck v. Donnell, 94 N.Y. 342, 346). The rule that leave of the appointing court be obtained before suing such a receiver was devised in order to protect the receiver and the estate against the harassment and expense of possibly unnecessary litigation and to preserve the estate in the hands of the receiver for the benefit of all creditors equally (Metropolitan Sav. Bank v. Residual Realties, 102 Misc.2d 1105, 425 N.Y.S.2d 508; James v. James Cement Co., 8 N.Y.St.Rep. 490; Hubbell & Curran v. Dana, 9 How.Prac. 424). It arose also from the fact that, because the property is held by the receiver as an officer of the court, or as it is sometimes said, as the hand of the court, interference with the property by the bringing of an action without leave may constitute contempt ( Matter of Directors of Christian Jensen Co., 128 N.Y. 550, 553, 28 N.E. 665; People ex rel. Attorney Gen. v. Security Life Ins. & Annuity Co., 79 N.Y. 267, 270; Foster v. Townshend, 68 N.Y. 203, 206; Chautauque County Bank v. Risley, 19 N.Y. 369, 377; Pruyn v. McCreary, 105 App.Div. 302, 304, 93 N.Y.S. 995, affd. 182 N.Y. 568, 75 N.E. 1133; see Anns., 39 A.L.R. 6; 48 A.L.R. 241). ¹

Nothing in the reasons upon which the rule is based mandates a holding that failure to obtain leave is a fatal and incurable error, nor although we recognize that there is a division in the lower courts on the question (see 7A Weinstein-Korn-Miller, N.Y.Civ.Prac. par. 6401.19, p. 75; compare McLaughlin, Practice Commentaries, McKinney's Cons.Laws of N.Y., Book 7B, C6401:4, p. 408), do we believe that the rule applied by the Appellate Division is the correct view. Thus, in Johnson v. Smith, 297 N.Y. 165, 77 N.E.2d 386, remittitur amd. 297 N.Y. 954, 80 N.E.2d 349, cert. den. 335 U.S. 824, 69 S.Ct. 47, 93 L.Ed. 378, we held that property in the hands of a receiver could be sold by the county treasurer for taxes without obtaining leave of court, and as part of the analysis noted in dictum "that, while propriety may suggest an application to the court before selling property possessed by a receiver, the failure to obtain leave neither defeats the action brought * * * nor invalidates the sale effected" (297 N.Y., at p. 172, 77 N.E.2d 386). More closely in point because it is a flat holding rather than obiter and concerns commencement of an action against a receiver rather than sale of property in his possession is Pruyn v. McCreary, 105 App.Div. 302, 93 N.Y.S. 995, supra, in which we affirmed, without opinion, but answered in the affirmative two certified questions asking whether the Supreme Court had jurisdiction of the person of the receiver and whether it had jurisdiction of the subject matter of the action (182 N.Y. 568, 75 N.E. 1133). The import of the affirmative answers given becomes clear when the Appellate Division opinion is read, for the rule it states is diametrically opposed to that applied by the Appellate Division in this case, as the following passage shows...