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Hale v. Mason

33 N.Y.S. 789 Court N.Y. Gen. Term Decision date 1895-05-14 English

Delivered by *790 PUTNAM, J.

Contents

Majority

p. 789
(86 Hun, 499.)
HALE v. MASON.
(Supreme Court, General Term, Third Department.
May 14, 1895.)

Headnote

1. Costs—Security for—Action by Receiver.
The receiver of an insolvent corporation will not, because there are no funds in his hands, be required to give security for costs, where the action was commenced by the corporation before the receiver was appointed, and he was about to bring it to trial in the name of the original parties when, on defendant’s motion, he was substituted as party plaintiff, and it does not appear that he was proceeding in bad faith or had been guilty of any mismanagement.
2. Same—Laches.
A motion to compel the receiver of an insolvent corporation to give security for costs in an action brought before the receiver-was appointed, and afterwards prosecuted by him, will be denied on the ground of laches where the motion was not made until 16 months after the receiver’s appointment
Appeal from special term, St. Lawrence county.
Action by Ledyard Hale, as receiver of St. Lawrence Manufacturing Company, against Marcus P. Mason, to recover the sum of $50,000, as damages for breach by defendant of his duty as one of the directors of said company. From an order requiring plaintiff to file an undertaking in the sum of $3,000, as security for defendant’s costs, and staying all proceedings until such undertaking should be filed, plaintiff appeals.
Reversed.
Argued before MAYHAM, P. J., and PUTNAM and HERRICK, JJ,
Russell, Poste & Percy (John C. Keeler, of counsel), for appellant.
A. E. Kilby, for respondent.

Assuming that the court below had power to grant the order from which the appeal is taken, we think, under the circumstances of the case, such power should not have been exercised. The plaintiff was appointed receiver of the St. Lawrence Manufacturing Company, in proceedings to dissolve the' corporation on the application of the people, through the attorney general. He did not commence this action, but found it pending. It was commenced by the corporation long before his appointment. It did not appear that he was proceeding with the action in bad faith, or had been guilty of any mismanagement. He was about to bring the case to trial in the name of the original parties, as he lawfully might (Warehousing Co. v. Badger, 67 N. Y. 294 ), when, on motion of defendant, he was substituted as a party plaintiff, and afterwards the order from which the appeal is taken was made requiring him • to file security for costs. The sole ground on which the order was granted appears to have been that the corporation, at- the time of his appointment, was insolvent, and that, as receiver, he had no funds in his hands with which to pay the costs of the action. We think that fact did not justify an order requiring plaintiff to file security for costs in the absence of any evidence of bad faith or mismanagement ; especially in an action like this, commenced by the corporation, and merely continued by a receiver appointed on the application of the attorney general of the state. See Jenkins v. Stowe, 2 Law Bull. 57; Kimberly v. Goodrich, 22 How. Pr. 424 ; Darby v. Condit, 1 Duer, 599 ; Shepherd v. Burt, 3 Duer, 645 ; Ryan v. Potter, 4 Civ. Proc. R. 80; Wassinger v. Fennell, 13 Civ. Proc. R. 286; Bennett v. Coble, 43 Hun, 354 ; Rutherford v. Town of Madrid, 77 Hun, 545 , 28 N. Y. Supp. 923 . The above authorities hold that in an action brought by a trustee, receiver, administrator, or other party the plaintiff will not be compelled to file security for costs merely on the ground of insolvency, or that he has no funds in his hands; that it is necessary, in addition to the fact of insolvency, to show that the action was brought in bad faith or heedlessly, or that the plaintiff will not probably succeed. Certainly, such proof should be required in a case like this, where the action was commenced by the corporation long prior to the appointment of the receiver, and is merely continued by him.

We are also of the opinion that the motion of defendant should not have been granted on account of the delay in moving. The receiver was appointed in January, 1893, and the motion to compel him to file security for costs was not made until May, 1894, 16 months after his appointment, and after plaintiff had served a notice of trial on defendant. See Robinson v. Sinclair, 1 Denio, 628 ; Doyle v. Currey, 2 Law Bull. 48.

The order should be reversed, with costs and disbursements to the appellant, and the motion denied, with costs. All concur.

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