other ground upon which it is claimed that plaintiff may recover, viz. that the transfers in question were made in contemplation of insolvency, with intent to give preferences, the following facts are pertinent:

"The Genesee Iron & Brass Works was incorporated September 28, 1888, to carry on the business of manufacturing and selling earthenware closets. Its capital stock was $50,000, and was all issued to Patrick J. Madden for patents. It would seem from the evidence, which is not very clear on this point, that Mr. Madden afterwards conveyed to the company the real estate on West avenue, where the company did its business, as a further consideration for the stock issued to him. The patents were carried on the books of the corporation at $25,100, and the real estate at $18,000. The real estate was mortgaged, when the company acquired it, for $9,000, which was its full value. It does not appear what the patents were worth, if, indeed, they were worth anything. The chattel mortgages did not specifically name them, but it seems to have been understood, by the three gentlemen who purchased the personal property sold on the foreclosure of the mortgage to the Flour City Bank, that the patents were included in the property purchased at that time, and for which they paid $3,900. The mortgagee's agent who conducted the sale states positively that he did not sell, or pretend to sell, the patents under the mortgage, but that, on the contrary, he stated that those rights must be acquired directly from the company. It does not seem to me to be of much importance how the title to the patents was acquired. What is important is that the purchasers at the sale did acquire it, and that their bid of $3,900 was made upon the assumption that they were to acquire it. Mr. Sullivan, one of the purchasers, testified that most of the property they bought was for use in connection with the manufacture of the closets to which the patents related, and would not be available for any other closets. The inference is that without the patents this property would have been of very little value. The value of the patents must therefore be considered as less than $3,900.

"It would seem that this corporation began business on a fictitious capital. As might be expected from such a beginning, the company did not prosper. No dividends were ever declared on its capital stock. The total expenses of the company for the first eight months of the year 1891 were $6,362.93. and during the same period it purchased merchandise to the amount of $3,613.05, while the total sales for the same time were only $8,641.40. On the 24th of March, 1892, the balance sheet showed the company to be in this condition:

Assets.

(Not including property mortgaged nor patents.)

Open accounts due..

(Of this amount, $798 had been carried on the books for some time.)

Cash in Flour City Bank....

$ 1,359 37

91

"On the 24th of March, 1892, the plaintiff recovered a verdict against the Genesee Iron & Brass Works in an action for damages for personal injuries, tried at Monroe circuit. The case had gone on the day calendar on the 18th of March; the trial commenced on the 22d or 23d day of March; and on the

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morning of the 24th, at the opening of court, the jury brought in a sealed verdict for $3,000, on which judgment for $3,309.62, damages and costs, was docketed the same day, at 11:10 o'clock a. m.

"On the same morning, between 9:20 a. m. and 9:30 a. m., there were recorded in the Monroe county clerk's office mortgages on the corporation's West avenue real estate, to Sullivan, Morris & Jerome, for $600, to Joseph A. Stull for $200, to Commercial Bank for $5,000, and to Flour City Bank for $8,000, and at the same time there were filed chattel mortgages covering all the company's personal property, to the same parties, with the exception of Stull, and for the same amounts. These mortgages were all dated March 19, 1892, were executed by Patrick J. Madden, as president, and were duly acknowledged by him the same day, before the same commissioner of deeds. They were authorized by a meeting of the board of directors held March 17th, and were prepared and executed in the office of the company's attorneys, Sullivan, Morris & Jerome. Mr. Sullivan, of that firm, said, at the meeting of directors, that he wanted a mortgage to secure his attorney's fees in case the Munson case went against him. The meeting was not called in the regular way, and only three of the five directors attended it. At least one of the other two directors had no notice or knowledge of the meeting.

"An execution issued upon the plaintiff's judgment, March 25, 1892, at 2:55 o'clock p. m., was returned unsatisfied, March 29, 1892.

"The sale under the chattel mortgage given to Flour City National Bank was held on April 2, 1892. By arrangement between themselves, all the defendants shared in the proceeds of this sale pro rata.

"A receiver of the corporation was appointed on April 14, 1892, in an action brought by a creditor. The only money or property that ever came into his hands was a balance of 91 cents on deposit in Flour City Bank, to the credit of the company. The corporate real estate was sold upon foreclosure of the first mortgage, and no surplus was realized.

"Upon this state of facts, it is claimed by the plaintiff that the mortgages to the various defendants were made by the corporation in contemplation of its insolvency, and so are void. There can be very little, if any, doubt that the Genesee Iron & Brass Works was practically insolvent in March, 1892. Its assets were only one-third of its liabilities, not including in the latter its capital stock. It had been doing business at a loss for some time. So far as the proof shows, it had not refused to pay any of its obligations when due, up to March 24th. By dint of renewals, it had succeeded in keeping its paper good. But the time was coming when the company could not meet its obligations, in the ordinary course of business, when due. And, in addition to its fixed obligations, there was the contingent liability of an unfavorable verdict in the Munson case hanging over the company's treasury. This contingency evidently assumed the proportion of an expectation; for on the 19th of March, when that case was on the day calendar of the circuit court, a meeting of the directors was hastily summoned by the company's attorneys, and preparations were made to protect the attorneys and the banks against the anticipated disaster. The mortgages were prepared and executed, and left with the attorneys, on the 19th. On the 24th, the day they were filed, the mortgages to both banks were handed to the attorney for the Flour City Bank, who naturally wondered that the mortgages running to the Commercial Bank should be delivered to him, and inquired the reason for it. He was told that the directors had given instructions that the mortgages were to be delivered together, and were to stand together, and if he took one he would have to take both. Thereupon he took them both, and filed them at the same time, 9:30 a. m. The mortgages to the attorneys had been filed 10 minutes before. Immediately upon filing the mortgages, and apparently without waiting to hear the verdict in the Munson case, the attorney for the Flour City Bank went to the works of the corporation, took possession of the property under the chattel mortgages, put a man in charge, and advertised a sale for the 2d of April. Reading motives in the light of events, it would seem to be plain that, irrespective of the outcome of the Munson case, the directors of the Genesee Iron & Brass Works had decided they could not go on with the business, when they authorized the mortgages. The natural effect

of filing mortgages covering all of the corporate property, real and personal, to four several creditors, would be to discredit the corporation, and invite suit by the unsecured creditors.

"However this may be, I think it may fairly be said, in view of all the circumstances, the hurried meeting of the directors a few days before the case was to be tried, the remark of the company's attorney to the effect that he wanted to be secured against an adverse verdict, the holding of the mortgages for five days after they were executed, and the filing of them a few minutes before the jury rendered a sealed verdict, that the transfers were made in contemplation of the insolvency which would inevitably follow the entry of a judgment in the Munson case, and with the purpose of preferring other creditors above this plaintiff.

"Having arrived at this conclusion, we have next to consider the question whether these mortgages were within the inhibition of any statute which was in effect at the time they were made, for they were undoubtedly good at common law.

"Prior to 1890, the statutory restriction upon transfers by corporations was as follows: 'Whenever any incorporated company shall have refused the payment of any of its notes,' etc., 'it shall not be lawful to make any transfer or assignment in contemplation of the insolvency of such company to any person or persons whatsoever.' Laws 1825, p. 448, § 2 (1 Birdseye's Rev. St. p. 969, § 33). This statute was repealed in 1882 (Laws 1882, c. 402, § 1, subd. 39), but again re-enacted in 1884 (Laws 1884, c. 434), by the repeal of the repealing act. It was again repealed in 1890, by the general corporation law (Laws 1890, c. 564), section 48 of which is as follows: 'No corporation which shall have refused to pay any of its notes or other obligations when due, in lawful money of the United States, nor any of its officers or directors, shall assign any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt; and no officer, director or stockholder thereof shall make any transfer or assignment of its property, or any stock therein, to any person in contemplation of its insolvency; and every such transfer or assignment to such officer, director or stockholder, or in trust for them or for their benefit, shall be void.' This again was amended on May 18, 1892 (Laws 1892, c. 688, § 48), so as to read: 'No conveyance, assignment or transfer of any property of any such corporation by it or by an officer, director or stockholder thereof, nor any payment made, judgment suffered, lien created or security given by it or by any officer, director or stockholder, when the corporation is insolvent, or its insolvency is imminent, with the intent of giving a preference to a particular creditor over other creditors of the corporation, shall be valid.'

The statute which was in force at the time the transfers in question were made was the one enacted in 1890, and not repealed until May 18, 1892. It is claimed by the defendants that the statute does not affect the transfers for two reasons: First, because it does not prohibit transfers by the corporation itself, but only those made by an officer, director, or stockholder; and, second, because the Genesee Iron & Brass Works had not 'refused to pay any of its notes or other obligations when due, in lawful money of the United States,' prior to the execution of the mortgages. In support of their construction of the statute, the learned counsel for the defendant banks contend that when an original statute, which in distinct terms forbade certain acts on the part of the corporation, and also on the part of its officers, is changed by omitting the prohibition against the acts of the corporation, leaving the prohibition against the acts of the officers in full force, and then is again amended so that once more the corporation, as well as its officers, is forbidden to do certain things, it cannot be said that the legislative intent has remained precisely the same. This would be a technical construction of a statute which, being remedial in its purpose, should be liberally construed, with a view to effectuating the intention of the legislature, which was to secure equality among the creditors of insolvent incorporations. Throop v. Lithographic Co., 125 N. Y. 530-533, 26 N. E. 742. The statute of 1890 is substantially the same as the one for which it was substituted. French v. Andrews, 81 Hun, 274, 30 N. Y. Supp. 796, affirmed in 145 N. Y. 441, 40 N. E. 214. The language of the statute is not so precise as it might be, but it

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can mean only one thing, viz. that a transfer of the property of a corporation made in contemplation of its insolvency is void. This construction of the statute has quite recently been adopted by the general term in the Second department. Manufacturing Co. v. Harrison, 73 Hun, 528, 26 N. Y. Supp. 109. Counsel for defendants concede that this is an apparent authority against them, but they contend that it is not in harmony with the decisions of the court of appeals in several cases wherein a distinction between the acts of officers and the acts of the corporation is indicated. They cite Throop v. Lithographic Co., 125 N. Y. 530-534, 26 N. E. 742; Phillips v. Campbell, 43 N. Y. 271; Sheldon Hat-Blocking Co. v. Eickemeyer Hat-Blocking Mach. Co., 90 N. Y. 607; Paulding v. Steel Co., 94 N. Y. 334. I have examined these cases, and they do not appear to me to conflict with the case in 73 Hun and 26 N. Y. Supp.

"The contention that the word 'thereof' in the statute of 1890 relates to a corporation which has 'refused to pay any of its notes or other obligations when due, in lawful money of the United States,' would seem to be disposed of adversely to defendants by Cole v. Iron Co., 133 N. Y. 164, 30 N. E. 874. That case arose under the Revised Statutes, but the language is quite similar. It might be claimed, with just as much force, that the words 'such company,' in the old statute refer to a company which shall have refused the payment of any of its debts.'

"The learned counsel for defendant banks, while not conceding the insolvency, present or imminent, of the Genesee Iron & Brass Works, contend with much earnestness, and equal ingenuity, that, even if the company was insolvent, or contemplating insolvency, at the time these mortgages were given, there is no proof that the mortgages were given in contemplation of that insolvency, but that, on the contrary, the evidence requires the finding that they were demanded by the banks and given by the corporation in the ordinary course of business, and so are within the principle of Paulding v. Steel Co., 94 N. Y. 339, and kindred cases. The evidence which it is claimed supports this contention is the testimony of Mr. Hathaway, the president at that time of the Flour City Bank, and of Mr. Pond, who was then cashier of the Commercial Bank. Mr. Hathaway testified that on the 15th or 16th of March, 1892, Mr. Madden, president of the iron and brass works, came in, and stated that they needed more money badly, and would secure the bank by a mortgage on their real estate on West avenue, and also, if required, on their personal property. The amount Madden mentioned was a few hundred dollars. Hathaway told him they could have the money upon giv ing that security, and the following day Madden brought in two notes, which Hathaway marked for discount to the credit of the company. These notes were dated March 17, 1892, and were made, one by Mary Egan, for $350 and interest, and the other by W. A. Granger, for $422.63 and interest, payable in three months to the order of the Genesee Iron & Brass Works. On or about March 21st, Madden brought in two more notes, dated that day, one made by Peter F. Keefe for $300, and the other by Patrick J. Madden, the company's president, for $200, payable in three months, with interest. Before discounting them, Mr. Hathaway inquired of the bank's attorney whether the mortgages had been delivered and filed, and upon being assured that they were made and ready for delivery, and would be filed, he marked the notes for discount, and the proceeds were placed to the company's credit. Upon cross-examination, Mr. Hathaway stated that these four notes were all new paper, and were marked for new discount. In this he seems to have been mistaken; for the books of the bank, which were afterwards introduced, show quite unmistakably that all but the Madden note were renewals of notes of the same makers which had been in the bank for some time. Mr. Hathaway admitted that he did not consider the account of the Genesee Iron & Brass Works a profitable one at that time; that he knew of the Munson suit which was pending; and that he knew the giving and recording of the chattel mortgage would tend to discredit the company.

"Mr. Pond, of the Commercial Bank, testified, in substance, that Mr. Madden came to his bank, and wanted a little additional loan, and it was agreed that his company should give a chattel mortgage, which should cover its indebtedness to both banks. It is conceded that no additional loan was

made to the company by the Commercial Bank after this arrangement. This testimony is corroborated, so far as the transactions were within his knowledge, by the attorney for the Flour City Bank, and it must be considered as proved that an arrangement was made between the two banks and the company, by which the latter agreed to give mortgages on all its property, real and personal, to secure its indebtedness to the former, and in consideration of which, the Flour City Bank discounted a new note for $200. This, however, it seems to me, is far from saying that the transaction was an ordinary business transaction, without any thought in the mind of either party of the company's impending disaster. It may very well be that the officers of the two banks were not aware of the company's bankrupt condition, nor of the disastrous effects of an unfavorable verdict in the Munson case. The statute, however, does not make the question depend upon the knowledge or intent of the creditor, but 'upon what was passing in the minds of the officers of the company when the mortgage was executed.' Paulding V. Steel Co., 94 N. Y. 341. It will hardly be claimed that Mr. Madden, when he made the arrangement by which these securities were given, and an additional loan of $200 obtained, was ignorant of the embarrassed condition of his company, nor that he failed to appreciate that certain disaster would follow upon the heels of a verdict for any considerable amount in the Munson case. If Mr. Madden and the other officers of the corporation, notwithstanding the pressure of great embarrassments, had entertained an honest expectation, in the exercise of a reasonable intelligence, of going on with the business and paying the debts, and, to that end, had borrowed of the defendant banks the necessary money, upon the security of the mortgages, their acts could not be brought within the operation of the statute. Even if the securities had been created for the purpose of raising money in order to distribute it by preferential payments among the creditors, it would be the payments, and not the securities on which the money was raised, which the statute would avoid. Curtis v. Leavitt, 15 N. Y. 113. There is here, however, no such situation. At most, only $200 was advanced upon the mortgages, which, on their face, purport to be securities for 'an indebtedness due and to become due,' and not for future advances. None of the authorities to which I have been referred has gone the length of holding that a mortgage, given mainly as security for a pre-existing indebtedness, will be made valid because a small part of the consideration was a new loan. Were it not for the maxim, 'Void in part, void in toto,' it might be possible to hold that the mortgage to the Flour City Bank was valid to the extent of the money actually advanced upon it.

"It is also urged by the defendants that the facts of this case bring it within the rule which was thus stated by Judge Danforth in Paulding v. Steel Co., supra: 'If they [the officers of the corporation] acted in pursuance of a previous contract, by which the company was bound, either in law or equity, or otherwise, under such circumstances that it could have no choice, the condition of insolvency became of no moment, for it was not in contemplation or in their minds. The intention, in such a case, must be referred to an actual obligation which the debtor was bound to fulfill.' That language was used with reference to a chattel mortgage which was given wholly for money advanced, and some five years after the loan was made, in fulfillment of an agreement made at the time, to give such security. I do not understand that this doctrine has any application to a case where the agreement to give security is made after the corporation has become insolvent, or when it is expected it will shortly become so.

"There remains one other question to be considered: Is the plaintiff a creditor who can maintain this action? The learned counsel for the Flour City Bank maintains that she is not, and quotes from the opinion in Esmond v. Bullard, 16 Hun, 65, which was an action against trustees of a corporation in default of an annual report, as follows: "The whole object of the statute (Laws 1848, c. 40, § 12) is to protect persons voluntarily dealing with the corporation and trusting its credit, not to protect those injured by mere tort.' The statute referred to provided that the trustees of a corporation, in certain cases. 'shall be liable for all the debts of the company then existing and for all that shall be contracted,' etc., and it was held that a liability for a tort

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