Kalinsky v. Lozada

Memorandum by the Court.

The facts on which these three appeals are predicated are fully set forth in the opinion of McNally, J., concurring in part. On the appeal from the order denying the application to commit the third-party Loza Restaurant, Inc., by its officer and director Tony Lozada—as provided in a prior order adjudging them in contempt and fining them $250—it appears that Lozada submitted an affidavit in which he attacked the regularity of the proceedings which resulted in the adjudication of contempt and denied service of the order for his examination as an officer of the corporation and the order adjudging the corporation in contempt. Before a proper determination could have been made on the motion to commit, Special Term should have referred the issues created by Lozada’s denials of service to an Official Referee to take proof thereon and to report. The same must be said of the appeal on the application to punish Lozada for contempt for violating the injunctive provisions of a subpoena and for paying out $1,200 in violation of these restraints. Here too Lozada denied that service of the subpoena was made on him. Moreover, he averred that the $1,200 paid to the bank, for which he received its draft (that he thereafter delivered to the State Liquor Authority for renewal of a license), were not the funds of the corporation but were supplied by brothers and a friend to obtain the renewal application. Apart from the attack on the regularity of the proceedings, the averments as to the source and purpose of the $1,200 create an issue as to whether Lozada had in his possession ‘ ‘ property or moneys belonging to the judgment debtor ’ ’ as required by section 781 of the Civil Practice Act. These issues, too, should have been referred for hearing and report. It could be held, if the matter be viewed technically, that implicit in the orders of February 18 and March 29—directing the judgment debtor and third party to submit to examination—was a finding that proper service had been effected. But, as a practical matter, we should not always draw such inference solely from the direction. To do so would dissuade attorneys—in instances where there was no proper service—from submitting their judgment debtors for an examination that would be inevitable at some later date. Such willingness should not be discouraged by imposing an implied waiver of jurisdictional defects.

The orders of March 29, 1957 are therefore reversed in the exercise of discretion, with costs to abide the event, and the motions granted to the extent of directing a reference to an Official Referee to hear and report on the matters hereinabove stated, and pending such report the determination of the motions should be held in abeyance. Order [June 26, 1957] so far as appealed from unanimously affirmed for the reasons set forth in the concurring in part opinion by McNally, J., with $20 costs and disbursements to the respondents State Liquor Authority and Underwriters Trust Company.