Gadsden v. Woodward — 3 N.Y. St. Rep. 102

Majority

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Henry A. Gadsden, Resp’t, v. Edward H. Woodward, impleaded with others, App’lts.^[1] Douglas Dixon, Resp’t, v. The Same, App’lts.

(Court of Appeals,

Filed October 5, 1886.)

Headnote

Corporations—Action to recover corporate debt as a penalty for

failure to file annual report—Pleading—Defendant need not SERVE A VERIFIED ANSWER TO A VERIFIED COMPLAINT—CODE OF ClVIL Procedure, §§ 523-837—Defendant privileged as a witness under § 837.

In an action against a trustee to charge him with a debt of a corporation by reason of a failure to file an annual report, the defendant is not obliged to serve a verified answer to a verified complaint. In such an action the defendant would not be obliged to testify if called as a witness. He is privileged under section 837 of the Code.

Appeal from order of the general term affirming an order of the special term denying defendant’s motion to compel the plaintiff to receive defendant’s unverified answer.'

The plaintiff served a verified complaint and the defendant Woodward served an unverified answer upon the ground that the action being brought to recover a penalty, under sections 837 and 523 of the Code of Civil Procedure, he was entitled to serve an unverified answer.

The plaintiff served notice that he elected to treat the unverified answer as a nullity, and thereupon the defendant moved at special term to compel him to receive the answers.

The motion was denied and the defendant declared in default. Upon an appeal to the general term the order of the special term was affirmed. How. Pr. (N. S.), Yol. 3, page 110.

The defendant, Woodward, then appealed to the court of appeals, and that court reversed the general and special terms.

James B. Dill (Dill, Chandler & Seymour), for app’lt.

First. The defendant was entitled to serve an unverified answer because under section 523 of the Code, the verification may be omitted “where a party pleading would be privileged from testifying as a witness concerning an allegation or denial contained in the pleadings.” In an action such as this, the defendant is privileged from testifying as a witness concerning the allegation of the complaint, because, under section 837 of the Code, a party is excused from giving an answer which will tend “to expose him to a penalty or a forfeiture.” Hughan v. Woodward, 2 How. Pr. (N. S.), 127. .

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Second. The court of appeals has declared this action to be an action for a penalty or forfeiture, with relation to the following sections of the Code: (1). Section 383, Merchants’ Bank v. Bliss ( 35 N. Y., 412 ); Stokes v. Stickney (96 id., 326). (2). Section 983, Veeder v. Baker (83 id., 156). (3). Section 189, Vernon v. Palmer (48 Super. Ct. R., 231). (4). Section 456 of the Code, Halstead v. Dodge (51 id., 169). Affirmed by the court of appeals.

Third. The opinion of the general term is in error when it assumes that the statute of 1848 “extends the liability of a corporation to the trustee, and impose upon him the obligation to pay the indebtedness.”

The court of appeals has squarely rejected this doctrine. Wiles v. Suydam, 64 N. Y., 173 .

Wilmot & Gage, opposed.

The Code of Civil Procedure that the verification of an answer may be omitted (where not otherwise expressly prescribed) where the party pleading would be privileged from testifying as a witness concerning an allegation or denial contained in the pleading. Section 523.

Section 837 declares that a witness shall not be required to give an answer which will tend to expose him to a penalty or forfeiture.

This action is brought against the defendant to recover a debt due by a manufacturing corporation of which he was a trustee, and he is sought to be made hable therefor on the ground that he failed to make the annual report required by the general manufacturing law. The action is not to recover a debt which he owes, but to impose upon him as a penalty for his default the payment of the debt of the corporation.

We have repeatedly held that such an action is an action for a penalty or forfeiture. Any admission which he might make in his answer in support of the plaintiff’s allegations would, therefore, necessarily tend to expose him to a penalty. Merchants’ Bank v. Bliss, 35 N. Y., 412 ; Veeder v. Baker, 83 id., 156; Stokes v. Stickney, 96 id., 325.

The liability sought to be enforced against the defendant does not arise out of any contract obligation, but is imposed by the statute as a penalty for disobedience of its requirements. .The distinction between the nature of this liability and that of stockholders under the same statute is clearly pointed out in Wiles v. Suydam ( 64 N. Y., 173 ), and Veeder v. Baker (83 id., 156-160).

The action is not founded on any debt owing by the defendant. The debts owing by the company are made the

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measure of the penalty. The orders should be reversed and the motions granted, with costs, in the court below, and one bill of costs in this court.

All concur, except Miller, J.. absent.