Case Name: George M. Boynton, as Receiver of the Property of Leon Marie, Respondent, v. Henry L. Sprague and Others, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1905-01
Citations: 100 A.D. 443
Docket Number: 
Parties: George M. Boynton, as Receiver of the Property of Leon Marie, Respondent, v. Henry L. Sprague and Others, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 100
Pages: 443–448

Head Matter:
George M. Boynton, as Receiver of the Property of Leon Marie, Respondent, v. Henry L. Sprague and Others, Appellants.
Receiver in supplementary proceedings — he may sue directors of a corporation, indebted to the judgment debtor, for a failure to file an annual report—he need not plead the giving of notice of an intention to do so— an order'may authorize the filing of his bond nunc pro tune — the failure to -file it may not be attacked collaterally.
A receiver appointed in proceedings supplementary to execution may maintain an action, against the directors of a corporation indebted to the judgment debtor, to enforce the liability created by section 30 of the Stock Corporation Law (Laws of 1892, chap. 688, as amd. by Laws of 1897, chap. 384) on the part of directors failing to file an annual report.
The receiver is not required to allege in his complaint or 'prove upon the trial the service upon the defendant directors of the notice of the intention to hold them personally liable prescribed by section 34 of the Stock Corporation Law (added by Laws of 1899, chap. 354), as section 34 is in the nature of a proviso, and the burden is upon the defendant directors to aver and prove that the case comes within its terms.
Where it appears that the order appointing a receiver in proceedings supple-, mentary to execution erroneously provides that the receiver’s bond shall be filed with the clerk of the county of New York, instead of with the clerk of the City Court of New York, where the bond is actually filed, the court has power, under section 723 of the Code of Civil Procedure, during the trial of an action subsequently brought by the receiver, to amend the order for the filing of the bond nune pro tune. ^
Semble, that the defendants in such action are not entitled to attack collaterally the irregularity in the filing of. the bond.
Appeal by the defendants, Henry L. Sprague and others, from, a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the ISth-day of March, 1904, upon the verdict of a jury rendered by direction of the court-after a trial at the New York Trial Term, and also from an order entered in said clerk’s office on the, 23d day of March, 1904, denying the defendants’ motion for a new trial made upon the minutes. -
This is an action brought by a receiver in supplementary pror ceedings of a creditor of the Sitka Developing Company against its president and others to recover of them personally, under section 30 of the Stock Corporation Law, the debt due from the company, as a penalty for their failure to file an annual report.
Leon Marie entered into a contract with the company on May 8, 1899, to act as general manager in Alaska for.one year at a -stated salary, and immediately went to Alaska, where he remained until November, 1899, when he was directed to return and was told that the company was without- funds to continue his employment. There was due him for salary on May 1, 1900, the sum of $2,650, which was never paid. In May, 1901, a. judgment was obtained against him in the City Court for the sum of $322.27. Execution on the judgment having been returned unsatisfied, the plaintiff was appointed receiver in supplementary proceedings and proceeded to institute this action.
It is conceded that in January, 1900, the company failed to file an annual report as required by section 30 of the Stock Corporation, Law (Laws of 1892, chap. 688, as amd. -by Laws of 1897, chap. 384), which section, after reciting the nature of the report to be made and filed, provides that “ if such report is not so made and. filed, all the directors of the corporation shall jointly and severally be personally liable for all the debts of the corporation then existing and for all contracted before such report shall be made.” The section also provides that a director shall not be so liable if he shall file a verified certificate, as therein specified, stating that he has endeavored to have such report made and filed, but that the officers Or a majority of the directors have refused and neglected to do so, and that he has not personal knowledge of the items required or sources from which to obtain information thereof.
By chapter 354 of the Laws of 1899, section 34 was added to the provisions of the statute, limiting the liability of the directors as follows: “No director * * ■* shall be liable to any creditor * * * because of any failure to make or to file an annual report * * * (2) Unless within-three years after the occurrence of the act or the default in respect of which it shall be sought to charge the director, * * * such creditor shall have served upon such director * * * written notice of his intention to hold him personally liable for his claim; provided, nevertheless, that any such liability * * * may be enforced by action begun * * * within the year eighteen hundred and ninety-nine * *
The complaint alleged the debt due and sets up section 30 averring that the report was not filed, but makes no reference to section 34, nor was there any proof offered by the plaintiff as to the giving of notice to the defendants.
There was no dispute upon the facts, and the court directed a verdict for the plaintiff, and from the judgment so entered the defendants appeal.
Allen Wardwell, for the appellants.
Joseph A. Arnold, for the respondent.

Opinion:
O'Brien, J.:
The appellants rely principally upon three grounds for the reversal of this judgment which may be considered in their order.
The first is that the right to recover the penalty did not pass to the receiver, it being a personal one, or, as expressed by the appellants, " the claim which Marie had against defendants being in the nature of a claim to recover a penalty and therefore an action ex delicto did not pass to the plaintiff as receiver in supplementary proceedings." ;
There are cases, some of which are referred to by the appellants, which hold that an action to recover a penalty for failure to file an annual report does not survive the death of the creditor. (Brackett v. Griswold, 103 N. Y. 425; Blake v. Griswold, 104 id. 613.)
While it is true, however, that the right to sue does not survive the death of a creditor, it is equally true that either by assignment in fact or by assignment in law, which would result from the appointment of a receiver, the creditor being alive, it would pass as an incident to the main debt. Thus, in Bolen v. Crosby (49 N. Y. 183), where a judgment against a corporation for services Was assigned by the creditor, and the assignee sued the trustees for failure to file a report, it was held that the assignment of the judgment carried with it the claim and debt upon which it was founded and all claims against others as collateral and incidental to it, and that the assignee's right to sue and to all the remedies which his assignor could have had, were perfect. (See, also, Stokes v. Stickney, 96 N. Y. 323.) It follows, therefore, that the plaintiff, as assignee, could sue to recover the penalty.
The second objection urgéd by the appellants is that the complaint did not allege, nor did the plaintiff prove, the giving of the notice required by section 34 of the Stock Corporation Law (supra). This contention is sought to be supported by the argument that where somewhat similar statutes have required the giving of notice in actions brought against municipal corporations, and ,in actions' brought against employers under the Employers' Liability Act, it has been held that, the giving of such notice was a condition precedent to maintaining the action, and the plaintiff must both plead and prove that such notice was given. It is unnecessary to point out the distinction between the statutes referred to .and the one here presented because the dissimilarity is shown and the question authoritatively settled in Shepard v. Fulton (171 N. Y. 184), wherein the. rule is thus stated: " Defendant's liability was created by section 30 of the Stock Corporation Law as it existed on January 1st, 1896. This statute was modified in 1899 by an amendment under which the liability was made to depend upon certain conditions. This modification was i/n- the nature of a proviso which the plaintiff was not bound to negative, either in his pleading or proof. The burden was on the defendant to aver and prove that the case was one falling within the terms of the amendment of 1899. Since he failed to plead or prove this essential fact he cannot complain because it is not found."
The appellants argue that the Fulton Case (supra) turned upon the fact that no notice was necessary therein as the action was begun within the year 1899, and hence it is not controlling. What was therein said, however, in the language quoted with respect to the nature of section 34 of the Stock Corporation Law we regard as decisive of the point here raised. That section of the statute requiring notice is a proviso, that is to say, a clause against the pleader following one for his benefit, whereas in the Employers' Liability Act (Laws of 1902, chap. 600, § 2) and in the .statute relating to municipal corporations (Laws of 1886, chap. 572, § 1) the requirement is an exception incorporated in the body of the clause. As pointed out in Rowell v. Janvrin (151 N. Y. 67), in the latter case he who pleads the clause must plead the exception, whereas in the former he may plead the clause and leave it to his adversary to show the exception. " If the modifying words are no part of the enacting clause, but are to be found in some other part of the statute, or in some subsequent statute, he may then state his case in the words of the enacting clause and it will be prima facie sufficient."
The appellants' third point is that the plaintiff never qualified as receiver, and was, therefore, not entitled to bring this action. The alleged defect is that in the order appointing the receiver it is provided that his. bond be filed with the " Clerk of the County of New York," but it was actually filed with the clerk of the City Court, and not until the trial of this action, when it was desired to offer the bond in evidence, was there any attempt made, to correct the error, an order being then obtained amending the order appointing the receiver nunc pro tune by striking out the provision as to filing with the clerk of the county of New York and inserting the provision that it be filed with the clerk of the City Court, the order reciting that the former provision had been inadvertently and erroneously inserted. The appellants argue that " the plaintiff failed entirely to qualify in accordance with the order of appointment, and should not .be permitted to cure that defect in the midst of the trial three years after the order was entered," and that the order amending the order of appointment was improperly, obtained. We think that, under section 723 of the Code of Civil Procedure, the court had the power to correct the error and properly did so, and that the defendants were not thereby injured. Furthermore, we, think the respondent is right in the' contention that the appellants cannot collaterally attack the irregularity in the filing of the bond. In this respect the case is similar to Morgan v. Potter (17 Hun, 403), wherein it was said: " The respondents take the position that the receiver has not filed a bond as required by the. order appointing him. It appears that he executed an undertaking or obligation which was not sealed. In that respect the instrument was irregular, but, we think, the judgment debtor only can take advantage of the irregularity." And in Wright v. Nostrand (94 N. Y. 31) it was said: " The only interest which the defendants have in the question of the regularity of the appointment of the plaintiff as- receiver is to see that he rightfully represents such plaintiffs in order that they may not be subjected to other actions for the same cause. *. If the judgment in this case be determined to be a bar *' then the defendants have secured all the protection to which they aré entitled. This protection seems to have been secured to them by the order authorizing the prosecution thereof.- * ' While it is essential in any action-brought by a receiver that he should show an appointment as such receiver it is yet not open to the party in a collateral proceeding to raise every question relating to the validity of such appointment,"
The other contentions of the appellants we have examined, but do not think that .they require discussion, our conclusion being ón the entire record that the court was right in directing a verdict for the plaintiff, and that the judgment and- order should be affirmed, with costs. -
Van Brunt, P. J., Patterson, Hatch and Laughlin, JJ., concurred.
Judgment and order affirmed, with costs.