
    William H. Conde et al., Resp’ts, v. Jeanette C. Hall et al., App’lts.
    
      (Supreme Court, General Term, Fourth Department,
    
    
      Filed December 26, 1895.)
    
    1. Corporations—Stockholder—Liability.
    A stockholder’s liability for a corporate indebtedness is discharged only pro tanto by the compromise and satisfaction of a prior judgment against the trustee of the corporation for the same indebtedness.
    3. Same—Evidence—Res gestae.
    In such action, a letter, explaining the compromise of the judgment, is admissible in an action as res gestae when such compromise is urged as a defense.
    Appeal from a judgment in favor of plaintiff.
    Lansing, Lansing & Jones, for app’lts; Elon R. Brown and Rogers & Atwell, for resp’ts.
   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 R. 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 ; 36 St. Rep. 138.

The defendants claimed at the trial, and do here, that the plaintiff’s 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 R. Hall was a stockholder in thai 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 amount 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. Ho payment • in any other way is claimed. This question of payment is fully discussed by Mr. Justice YAHH 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 witli Munson. See Whittemore v. Judd L. & S. Oil Co., 124 N. Y. 565 ; 36 St. Rep. 881.

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.

The opinion of Mr. Justice YAHH at special term isas follows :

I have found as a fact that defendant Zell E. 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 C. 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 chan 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 fifty 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 Clifford Manufacturing Company. Laws 1848, c. 40, § 15 ; Veeder v. Baker, 83 N. Y. 156. The judgments against Mr. Hall wore 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 bee'n paid in. Corning v. McCullough. 1 N. Y. 47 ; Flash v. Conn, 109 U. S. 371. The measure of damages if 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 tfie plaintiffs by said company were not compromised, but only their claims against Mr. Munson for the statutory liability under section 15. Although the existence of a debt against the corporation was necessary in order to make either Mr. Hall or Mr. Munson liable, neither was under the same liability, either in nature or extent, as the other, for one was liable as a stockholder and the other as a director. They were not jointly or severally liable for the same tiling. 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 Mr. Hall under this section, he is not liable jointly and severally with Mr. Munson on the judgment recovered against the latter thereunder. Section 15 makes all the stockholders severally liable to the amount of stock held by each until all the capital is paid in. Mr. Munson was not, while Mr. 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 Mr. 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 Mr. 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.

There must be judgment for the plaintiffs, upon the basis thus pointed out, and findings and 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.  