Case ID: nys_37/html/0411-01.html
Source: Caselaw Access Project
Author: {"author": "MERWIN, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

(92 Hun, 335.)
    CONDE et al. v. HALL et al.
    (Supreme Court, General Term, Fourth Department.
    December 26, 1895.)
    1. Corporations—Several Liability of Stockholder and Trustee—Payment.
    A judgment rendered against a stockholder for debts of the corporation, under Laws 1848, c. 40, § 10, providing that stockholders in manufacturing corporations shall be individually liable in case the whole amount of capital stock has not been paid in, is satisfied only pro tanto by the compromise and satisfaction of a judgment for the same debt rendered against a trustee of such corporation, under section 15, providing that a trustee shall be liable for the debts of the corporation for making a false report.
    2. Evidence—Res Gestae.
    In such action a letter from the trustee on the subject of the compromise is admissible as a part of the transaction.
    The opinion of Mr. Justice VANN at special term is as follows:
    I have found as a fact that the defendant Zell R. Hall, on the 25th of February, 1892, conveyed his interest in the Doolittle & Hall Block, situate in the city of Watertown, to his mother, Jeanette G. Hall, with the intention of keeping the same from his creditors and securing to himself the beneficial enjoyment thereof, and that she accepted the conveyance for the purpose of co-operating with him, and aiding him in carrying such intention into effect. It is the not unusual case of a man who, apprehending that a large, and, in his view, unjust, claim was about to be enforced against him, endeavored, by conveying to a relative whom he could trust implicitly, to place his property beyond the reach of creditors, and yet to continue to enjoy it himself. This the law does not tolerate, for the courts cannot classify their judgments, or hold that one is more sacred than another. The effort to avoid the payment of a judgment that is harsh in its effect when enforced, as in the case of one recovered for a penalty or against a surety, is just as fraudulent in the eye of the law as if directed against a claim «for groceries, clothing, or borrowed money. The law does not distinguish between debts by looking at their origin any further than to see that they are valid, but lends its aid to collect all alike from the property of the debtor; and any effort on his part to so dispose of his property as to hinder, delay, or prevent his creditors from reaching it is forbidden by statute, and condemned by the common law. The conveyance in question, therefore, although given to avoid the payment of what was regarded as an inequitable liability, must be set aside, unless the judgments upon which this action is founded have been paid, as alleged in the answer.
    The judgments in question against Zell R. Hall were recovered in an omnibus action, and are evidenced by the same judgment roll as certain other judgments for different amounts recovered at the same time and by the same plaintiffs against one Henry S. Munson. Before the commencement of this action, the judgments against Mr. Munson were satisfied by the filing of a satisfaction piece in the usual form, and the claim of payment is founded on the common-law rule that, if two persons are jointly or jointly and severally liable for the same debt, an unconditional release of one releases the other also. Lord v. Tiffany, 98 N. Y. 412; Breslin v. Peck, 38 Hun, 623. The judgments against Mr. Munson were not paid in full, but were compromised at about 50 cents on the dollar. They were founded upon the penal liability imposed by section 15 of the general manufacturing act of 1848, for making a.false report as a trustee of an insolvent corporation known as the Gifford Manufacturing Company. Laws 1848, c. 40, § 15; Veeder v. Baker, 83 N. Y. 156. The judgments against Blr. Hall were founded on a liability contractual in its nature, imposed by section 10 of the same act, upon a stockholder holding stock in such a corporation when the whole amount of the capital stock has not been paid in. Corning v. McCullough, 1 N. Y. 471 Flash v. Conn, 109 TJ. S. 371, 3 Sup. Ct. 263. The measure of damages is not the same under both of said sections, as under section 15 it embraces all the debts of the corporation, while under section 10 only debts to the amount of the stock held by each stockholder can be enforced against him. While payment of all the debts of the corporation would relieve from liability under either section, the debts owing to the plaintiffs by said company were not compromised, but only their claims against Blr. Munson for the statutory liability under section 15. Although the existence óf a debt against the corporation was necessary in order to make either Mr. Hall or Mr. Blunson liable, neither was under the same liability, either in nature or extent, as the other, for one was held liable as a stockholder and the other as a director. They were not jointly or severally liable for the same thing. They could have been sued separately, but if sued jointly, under one section only, there could have been a recovery against one only. As was said by the court of appeals in Farnsworth v. Wood, 91 N. Y. 308, 314, “the liability of stockholders under the act of 1848 is a several individual liability of each stockholder, directly to such of the creditors as have complied with the requisite conditions precedent.” Section 10 makes all the officers of the corporation who knowingly sign a false report liable jointly and severally for all the debts of the company contracted while they are stockholders or officers thereof. As there was no recovery against Blr. Hall under this section, he is not liable jointly and severally with Blr. Munson on the judgment recovered against the latter thereunder. Section 15 makes all the stockholders severally liable to the amount of the stock held by each until all the capital is paid in. Blr. Mun-son was not, while Blr. Hall was, held liable under this section. The liability of each, therefore, was several, personal, and exclusive. Neither had any legal interest in the liability of the other, and the release of one did not release the other. The release of Blr. Munson did not release Mr. Hall; but, while this is true, it is also true that the amount paid by Mr. Munson to the plaintiffs in order to obtain his discharge must be applied on their respective debts against the corporation; and the remainder only, with costs, if any, can be enforced against Blr. Hall. It is the indebtedness of the corporation to the respective plaintiffs that is the measure of liability under the statute, and, as that indebtedness is reduced, the liability is reduced in proportion. The distinction between the cause of liability and the measure of liability should not be lost sight of. The cause of liability is a violation of the statute, but the measure of liability is the indebtedness of the corporation, with certain limitations. •
    
      Appeal from special term, Jefferson county.
    Action by William H. Conde and others against Jeanette C. Hall and Zell R. Hall to set aside a conveyance of real estate as fraudulent against creditors. From a judgment in favor of the plaintiffs, defendants appeal. Affirmed.
    
      There must be judgment for the plaintiffs, upon the basis thus pointed out, and findings arid a decree may be prepared accordingly, and, if not agreed upon as to form, they may be settled before me upon a notice of two days.
    Argued before HARDIN, P. J., and MARTIN and MERWIN, JJ.
    Lansing, Lansing & Jones, for appellants.
    Elon R. Brown and Rogers & Atwell, for respondents.
   MERWIN, J.

In this action, the plaintiffs, as judgment creditors of the defendant Zell R. Hall, based on a liability existing prior to February, 1892, sought to set aside, as fraudulent and void as to creditors, a conveyance of real estate made by said defendant to the defendant Jeanette C. Hall, and bearing date February 25, 1892. The main issue at the trial was whether the deed was made and received with an intent to hinder, delay, and defraud the creditors of Zell E. Hall. It was found by the court that such was the intent of the debtor, and that the grantee received the deed with the knowledge of such intent, and for the purpose of aiding and co-operating with the debtor in the execution of such intent. A careful consideration of the evidence leads us to the conclusion that the evidence is sufficient to sustain these findings, and that there is no sufficient reason apparent for this court to disturb them. The appellants claim that the deed was given as security for advances made or to be made. Under the findings above referred to, the deed cannot stand as security. Baldwin v. Short, 125 N. Y. 553, 26 N. E. 928.

The defendants claimed at the trial, and do here, that the plaintiffs’ debts and judgments are paid. The plaintiffs had debts against the Gifford Manufacturing Company, a manufacturing corporation organized under chapter 40 of the Laws of 1848. Zell E. Hall was a stockholder in that company, and the judgments recovered by plaintiffs against him were based on his liability as a stockholder in case the whole amount of the "capital stock has not been paid in. Laws 1848, c. 40, § 10. One Munson was a trustee of the corporation, and the plaintiffs also recovered judgments against him for the amount of their debts upon his liability, under section 15 of the act of 1848, for making a false report as trustee. The judgments against Munson were afterwards compromised, and were satisfied by the filing of a satisfaction piece in the usual form. The special term applied upon the judgments against Hall the .amounts realized by the plaintiffs on the compromise with Munson, and declined to hold that the satisfaction of the Munson judgments ■ operated to satisfy the Hall judgments. Ro payment in any other way is claimed. This question of payment is fully discussed by Mr. Justice VARR in the opinion delivered by him at special term, and it need not here be further considered. We agree with the special term that the compromise and satisfaction of the Munson judgments did not satisfy the Hall judgments, and that Hall received all he was entitled to when the court applied on the judgments against him the proceeds of the compromise with Munson. See Whittemore v. Oil Co., 124 N. Y. 565, 27 N. E. 244.

The defendants claim error was committed in receiving in evidence a letter from Munson on the subject of the compromise. The defendants claimed the benefit of the satisfaction on record of the Munson judgments. The plaintiffs had a right to show the circumstances under which it was given and the arrangement in fact made with Munson. The letter was a part of the transaction that resulted in the compromise and satisfaction, and, on that ground, was -properly received. The judgment must, we think, be sustained. All concur.

Judgment affirmed, with costs.