Copeland v. Salomon, 56 N.Y.2d 222 (1982)
The failure to obtain prior court permission to sue a receiver is not a jurisdictional defect and can be cured retroactively; a receiver is liable in their official capacity for injuries sustained due to conditions on the premises where an owner would be liable.
Summary
This case addresses whether failing to obtain court permission before suing a receiver for a personal injury is a jurisdictional defect and whether a receiver can be held liable for injuries sustained on the property. The Court of Appeals held that failing to obtain prior leave is not a jurisdictional defect and can be cured. The court also clarified that a receiver is liable in their official capacity for injuries caused by the condition of the property, to the same extent a property owner would be. This liability extends to both active and passive negligence. The court emphasized the receiver’s duty to account for potential liabilities and provide notice to potential claimants, ensuring their opportunity to enforce their claims.
Facts
James Copeland, a tenant, was injured on November 29, 1975, while using a common stairway in a building under receivership by Salomon. Salomon had been appointed receiver in a mortgage foreclosure action on June 19, 1975. Copeland and his wife filed suit against Salomon on May 3, 1976, alleging negligence in his official capacity as receiver. Salomon had sought to resign as receiver on January 30, 1976, and was permitted to resign on February 17, 1976, subject to filing and confirming his accounts and applying for discharge. His accounts were approved on October 6, 1976. Salomon initially filed a pro forma answer, but later moved to dismiss for lack of jurisdiction.
Procedural History
The trial court initially stayed the action but denied Salomon’s motion to dismiss, allowing the plaintiffs to seek relief in the receivership proceeding. The plaintiffs then moved in the receivership proceeding for leave to sue Salomon and to vacate the order discharging him, which was granted. The Appellate Division reversed, holding that failing to obtain leave prior to suit was a jurisdictional defect. The Court of Appeals reversed the Appellate Division, reinstating the trial court’s orders.
Issue(s)
1. Whether failure to obtain leave of the foreclosure court prior to instituting a personal injury action against a receiver is a jurisdictional defect.
2. Whether Salomon was sued and liable in his official capacity as receiver.
3. Whether the Special Term had the authority to vacate Salomon’s discharge as to the plaintiffs’ claim and grant them leave to sue.
Holding
1. No, because the failure to obtain prior leave is not a jurisdictional defect and can be cured by a later order granting leave nunc pro tunc.
2. Yes, because Salomon was sued in his official capacity, was obligated to account for the plaintiff’s claim as a contingent liability, and was not effectively discharged from that claim.
3. Yes, because Special Term had the authority to vacate Salomon’s discharge and grant leave to sue, and it would have been an error of law not to do so under the circumstances.
Court’s Reasoning
The Court reasoned that the rule requiring leave to sue a receiver is not statutory but stems from the court’s inherent powers to protect the receiver and the estate. However, it’s not a jurisdictional prerequisite, meaning its omission isn’t a fatal error. Citing Pruyn v. McCreary, the Court emphasized that commencing an action without leave is merely a question of contempt of court and does not affect the court’s jurisdiction. The court can stay or set aside the proceeding, but until it interferes, the action is regular. Additionally, General Obligations Law § 9-101 makes a receiver liable in their official capacity for injuries sustained on the premises, to the same extent as the owner. The Court highlighted that damages for injuries caused by the receiver’s negligence are considered administrative expenses payable from receivership funds, holding priority over other creditors. The Court noted Salomon’s responsibility to include the Copelands’ claim as a contingent liability in his accounting and provide them with notice, protecting their right to be heard. The court noted, “The commencement of an action against a receiver without leave does not affect the jurisdiction of the court… Suing without leave is purely a question of contempt of court.” The Court also found that the discharge of Salomon would have been void for lack of notice to the Copelands, reinforcing the principle that meritorious claims should not be extinguished by a receiver’s discharge without proper notification.