Gulliver v. Roelle (100 Ill. 141, 1881)

Mr. Justice Walker

delivered the opinion of the Court:

The. questions presented by this record have been before us on previous occasions, but we do not content ourselves by saying stcvre decisis. More elaborate and thorough arguments have been made and filed than had been presented in the former cases, and new issues and questions have been raised and discussed. We have, therefore, owing to their importance, reviewed the grounds on which those decisions were based. In doing so, we have devoted more time to their investigation and discussion than is usual in deciding cases. Ho case in this court has, perhaps, ever re'ceived more thorough investigation. We will now proceed to announce some of our reasons and the conclusions reached.

The main question involved is, whether the 16th section of the general Insurance law imposes any liability on shareholders in companies organized under that act, and if so, does section 19 of the same act impose the same liability on shareholders in companies organized under special charters, and brought under the provisions of the general law ? The 16th section reads: “The trustees and corporators of any company organized under this act shall be severally liable for all debts or responsibilities of such company, to the amount by him or them subscribed, until the whole amount of the capital of such company shall have been paid in, and a certificate thereof recorded as hereinbefore provided.”

The true meaning of the words “trustees and corporators, ” as used in this section, is the matter of dispute in this case. On one side it is claimed that the word “corporator” is used as and for a shareholder; whilst on the other it is denied that it has or was intended to have such a meaning, but is used as synonymous with commissioner or promoter in organizing the company. It can scarcely admit of a doubt that the general and popular meaning of the word “corporator” concurs with the highest lexicographical authority,—that it means a member of a corporation; and all know that to be a member of a stock company a person must be a shareholder, or to be a member of a mutual company, a policyholder. This is so plain that the citation of .authority is unnecessary. And there can be no doubt that such is the sense in which the term is used in the 2d section of article 10 of the constitution of 1848. That section provides: “Dues from corporations not possessing banking powers or privileges shall be secured by individual liabilities of the corporators, or other means, as may be provided by law.” It is impossible to sup- ■ pose the body which framed this section ever supposed that holding the persons named in a charter for purposes of organization liable, would afford security to the creditors of these great bodies, transacting annually millions of dollars of business. That body could 'have intended nothing short of the liability of stockholders, or some other equivalent security. This being so, the constitutional requirement operates as an imperative command on the General Assembly, and being under that obligation, we must presume that body, in framing a general incorporation law, would endeavor to discharge the duty thus imposed. We can not, therefore, suppose that body would, for the purpose of affording the security, gravely insert the provision contained in the 16th section, simply to hold the promoters liable to the full extent of their subscription for stock, when each may have never subscribed for a dollar of the stock of the company, or may, at the time of its organization, have had but slender means, or been of doubtful solvency. It is impossible to call this security for the vast debts and liabilities of these companies. No such purpose can be justly imputed to any legislative body. Much less, as has been suggested, can it be supposed that body intended only to render the promoters of the organization liable, by enacting that section, for the comparatively trifling expense of preparing the charter and procuring the necessary subscriptions for the capital stock. For such expenses the corporation is not liable, and they are in no sense dues or liabilities of the corporation, and liabilities of the company only are embraced in the provisions of the 16th section. Railroad Co. v. Sage, 65 Ill. 328; Insurance Co. v. Smith, id. 309. Is such a presumption reasonable, when the General Assembly have made no other provision for the security of the creditors of such bodies? No one can deny that it was intended to impose a'liability on some class of persons, to the amount of stock by him or them subscribed, until all of the stock was paid and the certificate recorded. And it seems to be apparent that the term “corporator” was used in its ordinary sense, and can not with reason be referred to any other than shareholders in the company.

If, then, as there seems to be no doubt, this is the true interpretation of the language of that section, as applied to shareholders in companies organized under the general law, what effect has the 19th section produced on companies organized under special charters and the stockholders therein ? That section provides, that “all insurance companies heretofore organized in the State of Illinois, and now doing business in this State, are hereby brought under all of the provisions of this act, except that their capitals may continue of the amounts and character named in and authorized by their respective charters during the existing term of such charters, and the investments of the capital and assets of such companies may remain the same as prescribed by their charters, anything in this act to the contrary notwithstanding; and such companies shall also be entitled to all of the privileges and powers granted by said charters. ”

Inasmuch as the General Assembly, in granting an amendment to the charter to this company, expressly reserved the right to bring it under any general law regulating insurance companies that might be adopted, and it accepted the amendment, this case is free from the question of legislative power to impose further duties and make restrictions not contained in the charter. That power can not be questioned in this case, and when the meaning of the 19th section is ascertained, it only remains to apply it to this company and its stockholders. Then what effect did- the adoption of that section produce on this company ?

The first clause of that section, in terms, brings this and all other insurance companies doing business under charters from the State, and within its limits, under all of the provisions-of the act. But to the enactment there are several exceptions. There is an exception that their capital may continue the same as authorized by their charters, both in character and amount, and the investment of their capital and assets may remain the same as required by their charters, and they shall be entitled to all the privileges and powers granted by then: charters. It is not denied that this company, to some extent and for some purposes, was controlled by the general law; but it is insisted that these exceptions diminish the operation of the- act to a mere nominal control,—that it does not affect any of the powers granted by the charter, nor has it enlarged its powers or duties.

The charter of this company authorized it to invest or loan its capital on stocks, bottomry and respondentia, or in bonds and mortgages, or on personal security. Now, if its capital and surplus were thus invested, by the exception they could so remain; nor was the company required to increase its capital to conform to the general law, as it was by the exception exempted fromvsueh requirements, and the last clause saves to the companies acting under special charters all of the privileges and powers granted by their charters. This last reservation is claimed to be repugnant to the provisions of the act which impose any duties or requirements not contained in the charter, and impair their corporate rights.

It is urged that the charter provided, that when $100,000 shall be subscribed, and $10,000 paid in, and the stock not paid in shall be secured by mortgage on real estate worth at least fifty per cent more than the amount secured, or by pledge of public stocks of the United States, or any of the States or counties therein, or incorporated companies, etc., the company may organize and commence the transaction of business, and to bring this company under the provisions of the general act would infringe this right and be repugnant to the savings of the section. This is, we think, a misconception of the true meaning of the statute. If the stock was paid in or invested as authorized by the charter, thee19tli section, in terms, permits it to so remain, unaffected in the slightest degree. The charter required security or investment to be made in the securities enumerated, and it must have been done as required, and if so, that investment was protected, and nothing further was required by the act to be done in regard to the security or investment of the capital. There was no infringement of any of its chartered privileges or powers by the first clause of the 19th section, as limited by the last clause of that section.

Then what was intended by the last exception in the section, “and such companies shall also be entitled to all the privileges and powers granted hy said charters ?” This manifestly secured to them, and prevented the act from impairing, their privileges and powers as insurance companies. By the charter this company was empowered to effect fire, marine, life and health insurance. This was its privilege, and such was its power. Nor is it shown, nor does it appear, that any or either of these privileges or powers are impaired by any provision of the act, nor have counsel pointed out any right that is or can be so affected by the general law. Its further purpose was to secure to companies brought under the provisions of the act the unimpaired enjoyment of the franchises and powers conferred by their charters, and not granted by the general law. If their charters contained grants not conferred hy the act, they were preserved in full force, but it was intended to bring them under the controlling power of the State, to provide security to their creditors, as provided in the general law.

It is unreasonable to suppose that the General Assembly would do so inconsistent an act, as in the first clause of the 19th section of the law to bring all chartered companies of the State under the provisions of the act, and in the last clause exempt them from the operation of the act. Such folly can not be imputed to that body. It no doubt had a consistent purpdse in adopting both clauses, and we fail to perceive such repugnancy as repeals or abrogates either clause, but they may each be rendered operative. The General Assembly, by this language, only intended to require such companies to comply with such provisions as were practical. Matters which had been performed in organizing could not be required to be abandoned and annulled, to be performed under the general law. But it was intended that such companies should conform their business, pay or invest their capital as required by their charters, and be controlled by the general law in furnishing more capital when required, and subject to have their charters annulled in the mode therein provided, and they are brought under the provisions of section 16 as a part óf the plan for the government and control of all companies, whether organized under special charters or under the general law, to afford security to their creditors.

Then who are embraced in the term “trustees,” in the 16th section? Manifestly the directors, or persons selected by the shareholders, at the time of organizing, to manage and control the affairs of the body. It can refer to no other class of persons. Such is its manifest meaning in the 4th section of the act, where the two are used as convertible terms. It provides for the election of “trustees or directors, ” each of whom is required to own $500 worth of stock, and a majority to be citizens of the State. And the 11th section authorizes the corporators, trustees or directors, as the case may be, to make by-laws. Manifestly corporators here mean shareholders. It surely was not intended that the promoters of the organization shall, or even may, prescribe by-laws for the government of a company and the management of its future business, when they may not be members of the company. By-laws are not required until the company is organized, and under the 11th section, when organized, either the shareholders or the trustees or directors, as they may be designated, may adopt by-laws. If the charter provides that the shareholders shall adopt them, they may act in conformity to the charter. So of the trustees or directors, whichever they may he called, when the charter so provides. This is done after the company is organized, and the section can not, by any construction, apply to the promoters.

It is also insisted, that had the General Assembly intended to render shareholders in comiianies transacting business under special laws liable, provision would have been expressly made by which the certificate that the stock was all paid could have been obtained. Such a conclusion does not necessarily follow. If the intention was to hold them so liable until paid or secured, and the certificate obtained and recorded, the means are undeniably provided by the statute,—if not in terms, then it can be had in the most practical manner.

The General Assembly has provided that certain preliminary steps shall he taken and observed in organizing a new conrpany. The last, and that which licenses the company to transact its business, is the certificate that all of the capital stock required by the charter has been paid in, and is possessed by the company, in money or in such stocks and bonds and mortgages as are required by the 8th section of the act, which certificate, made by the Auditor, is required to be filed in the office of the clerk of the county, and is declared the authority for the- commencement of business by the company. Why require the capital stock to be paid in and held in money, stocks, bonds or mortgages ? Obviously, as we have seen, to afford security to the creditors of such companies, to the full extent of their capital stock. This security was one of the controlling purposes of the act, and in obedience to the requirements of the constitution, and to render the payment of the capital stock certain, the shareholders were rendered liable to the amount they should severally subscribe until all of the stock should be paid in, and the certificate of the fact by the Auditor was procured, filed and. recorded, as required by the 10th and 16th sections. This is clearly the requirement and the reason that prompted the action of the General Assembly as to the liability of shareholders in companies organized under the general law.

The same reasons existed for requiring the same security to creditors of companies specially organized as those formed under the general law. There is not, nor can there be, the slightest reason for a difference, in this respect, between the two kinds of companies. The requirements of the constitution were the same with both. The necessity for securing creditors is as imperative in the one class as the other. Hence the enactment of the 16th section creating the liability of shareholders in companies organized under that law, and of the 19th section bringing all companies acting under special charters under the same ■ liability, and of the 21st section, which requires them to report to the Auditor the condition of their companies on the first day of January of each year, giving the amount of capital paid in, and in what manner invested, together with other information. From this it is clear that in these several respects the intention was to place both classes on precisely the same footing,—to create the same liability in every respect, unless exempted by their special charters. They were not exempted from procuring and recording the certificate required by the 10th and 16th sections, nor were the shareholders exempted from paying in or securing their capital stock, or from the liability imposed by the 16th section, or the companies relieved from investing their capital in the mode prescribed by their charters, or according to the requirements of the general law. They were made subject to the performance of these acts.

Until the certificate required by the 10th section was procured and recorded, a company organized under the act is not authorized to transact business, and when companies specially organized were brought under the provisions of the general law, it devolved on them to procure a similar certificate, and record the same, to authorize them to continue in business, and to relieve the shareholders from the liability imposed by the 16th section.

Having ascertained this to be the intention of the law makers, it devolves upon the courts to so construe the statute as to effectuate their intention. It is manifest that the same law which subjects companies organized under special charters to the duties and liabilities imposed by the general law, by implication imposes the same duties upon the Auditor, upon proper application of the company, to make the requisite examination, and give the necessary certificate if upon such examination the facts should warrant it. The company could, therefore, have required the Auditor to examine, or cause to be examined, the affairs of the company, and ascertain whether all of the capital had been paid in or secured, and invested as required by its charter or the general law, and if he so found, to give the requisite certificate, which could have been filed and recorded.

It would be useless to require this company to perform the acts necessary to organize a new company. If the shareholders had secured the balance of their subscriptions, or had paid it, and it was invested as required by then- charter, that, under the exceptions in the 19th section, would be held payment and investment of the capital, within the meaning of the 8th section, and would require the Auditor to grant the necessary certificate, which could have been recorded as required.

We are aware that in the case of Chase v. Lord, 6 Abbott, (N. C.) 268, the New York Court of Appeals gave a different construction to a section of the Insurance law of that State. The section of that law is in some respects similar to the 16th section of our act. It is this: “The trustees and corporators of any company organized under this act, and those entitled to participation of the profits, shall be jointly and severally liable until the whole amount of the capital raised by the company shall have been paid in, and a certificate thereof recorded as herein provided.” It will be observed the language of the two sections is not the same, but it is not important at this time to determine whether their meaning is the same.

Under that law, a company was formed in that State, and for a time transacted business, and then failed. Before its failure, the company took a risk insuring a vessel and its cargo, which were lost. The assured thereupon sued the executor of one of the shareholders who had paid his stock in full, but a portion of the subscribers had not paid, nor had the certificate that all of the stock had been paid ever been procured and recorded. The circuit court held the executor liable, and rendered judgment against him, and he appealed to the Supreme Court, where the judgment was affirmed, and is reported in 16 Hun, 369; The case was taken to the Court of Appeals and the judgment was reversed by a bare majority, three of the judges dissenting.

That case is not a construction of the statute that is authoritative with us, as it was made subsequent to the adoption of our statute, and if ours is a copy of a provision of their statute, it is not binding on us. Again, including the judges of the Supreme Court, there were six judges who held the stockholder liable, and four who held the reverse doctrine. Again, on turning to the opinion of the Supreme Court and the dissenting opinion of the judges of the Court of Appeals, the reasons for their conclusions are, to our minds, more forcible than those in the authoritative opinion of the Court’of Appeals. The number of the opposing and dissenting judges impairs the authority of such a decision.

It is said the declaration is insufficient. It avers, “that the whole amount of the capital of said corporation has never been paid in, and no certificate of such payment has been given or recorded as required by the statute of Illinois, but, on the contrary, not more than one-half of said capital stock subscribed has ever been paid into said company. ” There is an averment that defendant had subscribed for fifty shares of the capital of the company. These averments are admitted by the demurrer. Each subscriber undertook and became liable by his subscription to pay the full amount in cash, and the 16th and 19th sections of the general law impose continued liability on all subscribers, whether they have paid in full or not, until all of the stock is paid, and a certificate thereof is obtained and recorded. If all of the stock of the company was not paid, and the certificate not obtained and recorded, there was a liability for the amount prescribed by the 16th section of the law.

The declaration in the case avers, and the demurrer admits, that no more than half of the capital has been paid into the company* Had it all been paid in, and invested as required by the charter or the general law, and the certificate been obtained and recorded, it may be the company would not have proved insolvent, and plaintiff would have been paid out of the funds the company should have had from the subscribers for its stock. At any rate, defendant and all other stockholders in the company would have been relieved from liability. The company no doubt procured credit on the supposition that all of the stock had been paid ' to the company, and was available to pay all liabilities of the company.

We are, for these reasons, of opinion, that the construction we have given to the 16th and 19th sections, on the facts stated in the declaration not overcome by a defence, renders appellee liable to pay the amount of appellant’s claim against the company, and that the court below erred in sustaining the demurrer.

The judgment is reversed and the cause remanded.

Judgment reversed.

Mr. Justice Sheldon,

dissenting:

The general Insurance law of this State, which came in force July 1, 1869, contains the following sections:

“Sec. 16. The trustees and corporators of any company organized under this act shall be severally liable for all debts or responsibilities of such company, to the amount by him or them subscribed, until the whole amount of the capital of such company shall have been paid in, and" a certificate thereof recorded, as hereinbefore provided. ”

“Sec. 19. All insurance companies heretofore organized in the State of Illinois, and now doing business in this State, are hereby brought under all the provisions of this act, except that their capitals may continue of the amounts and character named in and authorized by their respective charters, during the existing term of such charters, and the investments of the capital and assets of such companies may remain the same as prescribed by their charters, anything in this act to the contrary notwithstanding; and such companies shall also be entitled to all the privileges and powers granted by said charters.” Rev. Stat. 1874, pp. 595-6.

The ground of the claim of the individual liability of the defendant for this debt against the company is, that the whole amount of the capital of the company has not been paid in, and a certificate thereof recorded, according to said section 16 of the general Insurance law. The claim of the liability is not under the charter of the company; there is no pretence that defendant has not paid his subscription for stock; but the claim is rested on this provision in section 16, and the provision in section 19, of the general Insurance law, which was passed subsequently to the charter and the organization of the company. On account of a reservation contained in an amendment to the charter, there is no question made by counsel as to the power of the legislature to impose this individual liability by this subsequent general Insurance law, if “corporators” is to be construed as including stockholders; but the question is, whether it has done so. Section 16, of the general Insurance law, is a provision in reference to insurance companies which should thereafter be organized under that general Insurance act. Section 19 of the act brings all insurance companies theretofore organized in the State, and doing business, under all the provisions of such general Insurance act, except that their capitals might continue of the amounts and character named and authorized by their charters; that the investments of the capital and assets of such companies might remain the same as prescribed by their charters, anything in the act to the contrary notwithstanding; and that such companies should he entitled to all the privileges and powers granted by them charters. It is thus only in certain respects • that already organized insurance companies are brought under the provisions of the general Insurance law, and the inquiry here. is, whether in this respect of this provision of the law in section 16, the Germania Insurance Company has been brought under the general Insurance law. It has not—as is explicitly declared by said section 19—if thereby there would be interference with its capital continuing of the character authorized by its charter, with the investments of its capital and assets remaining the same as prescribed by its charter, or with the privileges or powers granted by its charter.

The charter is to be looked at, as it is made a public act, and the declaration makes it a part thereof. The charter of the company provides, that when the corporators and their associates shall have subscribed $100,000, and shall have paid in $10,000, and shall have secured the stock not paid in by certain enumerated securities, and have chosen certain directors and officers, the company shall be deemed fully organized, and enjoy the powers conferred by the charter. 'Ah the declaration avers that the corporation was organized under and by virtue of its charter, and had been in operation long prior to the passage of the general Insurance law, it may be assumed that these conditions of the charter, as to the amount of stock to be paid in, and the giving of the required securities for the stock not paid in, had been complied with, the presumption to be indulged being, that the company was rightfully organized and rightfully doing business.

It being taken, then, that the required amount of stock had been paid in, and that the residue of the stock not paid in had been secured in the prescribed manner, the company had a franchise to do the business of fire, marine and life insurance. The securities for the stock not paid in formed a part of the capital stock of the company,—constituted a feature of the character of its capital. It was to all substantial intent and purpose an investment of the capital and assets of the company. It was, in effect, the same as if the subscriptions had been paid in and the money then invested in such securities, and, in my view, comes within the exceptions in said section 19 of the general Insurance law, as to bringing already organized companies under its provisions; that the capital of any such company might continue of the character authorized by its charter, and that the investment of its capital and assets might remain the same as prescribed by its charter. This would seem to be language framed with a view to just such a case as here presented. It was also a privilege to the company to hold and retain these securities as they were, and so the case may also be regarded as within the last and more general exception of the section, that the company should be entitled to all the privileges and powers granted by its charter.

There is every reason why there should have been exception of such cases. These assets of the company, its unpaid subscriptions, were secured by satisfactory securities, as is to be presumed. To what end should they have been required to be immediately collected in ? It could not be for the purpose of having the money kept in hand, for the general Insurance law itself authorizes the companies to be formed under it to invest their capital and assets in securities. By such collection, securities which were satisfactory would have been forced to be collected in, in order, as the general Insurance law authorizes to be done, to reinvest the proceeds in securities again. No such idle purpose could be attributed to the legislature, and the necessity of any such action was guarded against by the exceptions named.

Further, this provision in section 16 has no proper application to insurance companies already organized and doing business. It relates to insurance companies to be thereafter organized under that general’ Insurance law. The act made it a preliminary and a prerequisite to the commencement of business and issuing policies, by any company, that the whole amount of the capital of the company should have been paid in, and a certificate thereof from the proper officer be obtained and filed, the 10th section of the act providing, “which, [cerifícate] on being filed in the office of the clerk of the county where the company is to be located, shall be their authority to commence business and issue policies; ” and the 16th section, under which the liability here is claimed, provides that until the whole amount of the capital of any company organized under, that act shall have been paid in, the trustees and corporators of the company shall be liable for all debts or responsibilities of the company to the amount by them subscribed. But this company, by its charter, was authorized to commence business when $10,000 should have been actually paid in on the stock subscribed, and the residue of the subscriptions secured as by the act provided. Under this authority of its charter it was already, when the general Insurance law was passed, and for a long time before had been, rightfully doing business.

This provision in section 16, in relation to something to be done by insurance companies thereafter to be formed as an authority for them to commence business, would not properly apply to preexisting companies which were already, and for a long time before had been, rightfully doing business. The latter needed no authority to commence business and issue policies. They already had it. But it was future companies, thereafter to be organized under the law, that were required to have such authority to commence business and issue policies, and until they obtained it the trustees and corporators were made subject to this liability imposed by this 16th section of the act.

; To repeat, in short: Previously organized companies, under special charters, are in some respects brought under the provisions of the general Insurance law. The bringing them under such provisions is done entirely by the 19th section of the act;, but this section carefully enumerates certain exceptions where such former companies shall not be brought under the provisions of the act. It does seem to me that the case of this insurance company, with the special provision of its charter for the investment of the unpaid portion of subscriptions in certain enumerated securities, comes within these exceptions upon any fair reading of language. To apply, here, the provision in section 16 of the act, and make the stockholders in this company liable for the debts of the company to the amount of then' subscriptions, until the whole amount of subscribed stock of the company shall have been actually paid in, in money, and a certificate thereof obtained and recorded, as provided by the act, would, as I conceive, be in contravention of such exceptions that the capitals of such previously organized companies “may continue of the amounts and character named in and authorized by their respective charters, and the investments of the capital and assets of such eom-panies may remain the same as prescribed by their charters, anything in this act to the contrary notwithstanding; and such companies shall also be entitled to all the privileges and powers granted by said charters. ” And it would seem, further, as before said, that this provision as to the whole amount of capital being paid in, and a certificate thereof being obtained and recorded, which is made the authority for commencing business and issuing policies, is, in its nature, not properly applicable to preexisting companies doing business under authority of law theretofore granted.

These, as I regard, are reasons sufficient, without looking further, for sustaining the demurrer to the declaration. There is no previous case of contrary import in this court which should have any binding force as a precedent.

In the case of Butler v. Walker, 80 Ill. 345, in denying the application for a rehearing, there was express reservation made that the grounds of the decision in that case might be reexaminable in any subsequent ease of the kind that should come before the court. The special provisions of the charter of the insurance company there, in respect of the authority for the taking of securities for the unpaid portion of its subscribed stock, were not at all considered or brought to the attention of the court in that case. Subsequent cases,'until the present, but followed Butler v. Walker, there having been no raising or consideration of the questions- in this case discussed. Not until now has there been a presentation or consideration of these questions.

Mr. Chief Justice Dickey

dissenting:

I concur fully in the views presented by Mr. Justice Sheldon, and will add some additional reasons why I tbinlr the judgment of the circuit court in this case was right, and ought to be affirmed.

I hold, first, that the 16th section of the act in question has no application to mere stockholders, even in a company organized under this act, but refers alone to the officials of such company,—the original corporators or promoters, and to their successors, the trustees or directors of such a company.

I hold, secondly, that (assuming the word corporators in section 16 to mean mere stockholders in a new company, and disregarding altogether the exceptions in section 19, on which Mr. Justice . Sheldon very properly relies,) the words of section 19, wherein it is said: “All insurance companies heretofore organized in the State of Illinois, and now doing business in this State, are hereby brought under all the provisions of this act, ” were not intended to make the provisions of section 16 applicable to such old companies.

And, lastly, if this statute means that each of the stockholders in such old companies, although he paid in full for his stock and owed nothing for it to his company, should be personally liable to the extent of the par value of his stock for all debts of his company thereafter contracted, without the stock of others being all paid in, in cash, and so certified by the directors or officers of their company, although not contracted with the personal approbation of such stockholder, I hold that the General Assembly had no constitutional power to enact such a provision, and that the statute is not operative to sustain such a liability.

As to my first proposition, I concede that the word corporator is often properly, and perhaps usually, used to mean “a member of a corporation, ” and that in that sense stockholders are “corporators. ” The word corporators is, however, often used, and not improperly, in a more limited sense, meaning only those persons who are the original organizers or the promoters of a new corporation. I think it is in this, the more limited sense, this word “corporators” is used in this section 16 in its application to companies formed under this act of 1869.

To get the true meaning of any section of a statute it must be read with the context. Section 16, by its very terms, refers ns to previous sections for its full meaning. It imposes on somebody a liability, until the whole capital shall have been paid in and a certificate thereof recorded, “as hereinbefore pro vided.” We must look to foregoing sections to find out what capital is to be paid in, and how it is to be paid in, and what certificate of such paying in is referred to, and how and where it is to be recorded, in order to avoid the liability intended to be imposed by this section 16. The liability mentioned by this section is plainly imposed as a penalty on somebody for the neglect of some duty. We must, therefore, look to foregoing sections to learn what these duties are, and upon whom these duties are by law imposed. It is a mistake to say that section 16 requires the paying in of capital, or the recording of any certificate. It does not purport to impose any duty upon any one. It merely imposes a liability for a neglect of duties referred to, “as hereinbefore provided, ”—that is, for the neglect of duties imposed by the provisions of some clauses to be found in foregoing sections.

The following are all the words of the previous sections which can have any bearing upon any of the questions discussed in this case:

Sec. 1. “Any number of persons, not less than thirteen, may associate and form an incorporated company, ” (to transact insurance business named in that section.)

Sec. 3. “Such persons shall file in the office of the Auditor * * * a declaration, signed by all the corporators, expressing their intention to form” such a company, “which declaration shall also comprise a copy of the charter proposed to be adopted by them. ”

Sec. 4. “The charter comprised in such declaration shall set forth the name of the company, the place” of the principal office, “the mode and manner in which the corporate powers granted by this act are to be exercised, the mode and manner of electing trustees or directors,—a majority of whom shall be citizens of this State,—and of filling vacancies-; but each director of a stock company shall be the owner of at least $500 worth of the stock of such company at its par value, * * * and the amount of the capital to be employed in the transaction of its business. ” * * *

Sec. 6. ’“No joint stock company shall be incorporated under this act in the city of Chicago * ’ *■ * with a smaller capital than $150,000, actually paid in, in cash, nor in any other county in this State with a smaller capital than $100,000, actually paid in, in cash. * * * No joint stock fire insurance company organized under this act, or transacting business in this State, shall expose itself to any loss on any one * * '* risk in amount exceeding ten per cent of its paid up capital. ”

Sec. 7. “It shall and may be lawful for the individuals associated for the purpose of organizing any company under this act, ” (after filing certain papers and giving certain notices,) “to open books for subscription to the capital stock of the company so intended to be organized, and keep the same open until the full amount specified in the charter is subscribed. ”

Sec. 8. “It shall be lawful for any insurance company * * * incorporated under any law of this State, to invest its capital, * * * or any part thereof, in bonds and mortgages” (on property of a value prescribed), and also “in the stocks of this State, or stocks or treasury notes of the United States, and also in bank stock of national banks, and also in the stocks and bonds of any county or incorporated city in this State.”

Sec. 10. “The charter * * * herein required to be filed * * * shall be examined by the Attorney General, and if found conformable to this act' * * * shall be certified by him to the Auditor, * * * who shall thereupon cause an examination to be made, either by himself or by three disinterested persons specially appointed by him for that purpose, who shall certify, under oath, that the capital herein required of the company named in the charter * * * has been paid in, and is possessed by it in money, or in such stocks-and bonds and mortgages as are required by the 8th section of this act; * * * and the corporators and officers of such company shall be required to certify, under oath, that the capital exhibited to those persons is bona fide property of the company. Such certificate shall be filed in the office of the Auditor, who shall thereupon deliver to such company a certified copy of the charter and of said certificates, which, on being filed in the office of the clerk of the county where the company is to be located, shall be their authority to commence business and issue policies; and such certified copy of the charter, and of said certificates, * * shall be conclusive evidence of the fact of the organization of such company.”

Sec. 11. “The corporators, or the trustees, or directors, as the case may be, of any company organized under this act, shall have power to make such by-laws * * * as may be necessary, * * * and the same, when necessary, to alter and amend, and they and their successors may have a common seal.”

Sec.' 12. “It shall not be lawful for any directors, trustees or managers of any insurance company to make any dividend, except” (under certain conditions set forth in the section). “Any dividend made contrary to these provisions shall subject the company making the same to a forfeiture of its charter, and each stockholder receiving it to a liability to tlie creditors of such company to the extent of the dividend received, in addition to the other penalties and punishments in such case made and provided.”

Sec. 13, after certain provisions in relation to mutual insurance companies, says: “Every person effecting insurance in any mutual company organized under this act, * * shall thereby become members of said corporation during the period of insurance. * * * The directors shall, * * * after receiving notice of any loss or damage by fire sustained by any member, settle and determine the sums to be paid by the several members thereof, * * * and the sum to be paid by each member shall always be in proportion to the original amount of his deposit note or notes. * * * And if any member shall, for the space of thirty days * * * after notice upon such member, * * * neglect or refuse to pay the sum assessed upon him, * * * the (Erectors may recover the whole amount of his deposit note; * * * but no member shall ever be required to pay for any loss * * * more than the amount of his deposit note. ”

Sec. 14. “Every company doing business as a joint stock company shall, upon the face of its policy, in some suitable manner express that such policy is a stock policy. ”

Sec. 15. “Suits at law may be maintained by any corporation formed under this act against its members or, stockholders, for any acts relating to the business of such corporation ; and suits at law may be prosecuted * * * by any member or stockholder against such corporation.”

A careful consideration of these previous sections shows the things to be done before any policies can lawfully be issued, and are in them order the following: The thirteen promoters are (by the first section) to associate and form an incorporated company, with a view of acquiring lawful authority to issue policies of insurance. This is done by agreeing upon and preparing a charter, and preparing and filing with the Auditor a declaration in writing (comprising a copy of the charter), signed by all the “corporators,” (that is, by the thirteen original associates,) as provided in section 3. This charter must set forth, among other things, “the amount of the capital to be employed in the transaction of its business,” and “the mode and manner of electing trustees or directors,” as required in section 4. When this declaration (comprising a copy of the charter) has been filed with the AuEtor, thus signed by these original thirteen organizers, (called; in section 3, “corporators,”) they are authorized, by section 7, to open books for subscription to the capital, and keep the same open “until the full amount specified in the charter is subscribed. ” By section 6, this amount of capital must be at least $150,000 for a company to do business in Chicago, and at least $100,000 fór a company to operate in any other county in this State, and before the enterprise is in readiness for an examination by the Auditor, all of this capital must, by section 6, be “paid in, in cash. ”

Up to this stage there are no duties prescribed to be performed by directors "or by stockholders. After this capital is thus paid in, in cash, it may (by section 8) be invested by these thirteen original corporators, in part or in whole, in stocks and bonds, such as are set forth in that section.

At this stage of the proceedings, the affairs of the company still under the control of these original corporators, everything is ready for the final examination to be made under the direction of the Auditor. The charter, and proof of the publication herein required, having in the meantime been examined by the Attorney General, and found conformable to the statute, and so certified by him to the Auditor (as is provided in section 10), it is then the duty of the Auditor to cause an examination to be made. This may be made by three disinterested persons appointed by the Auditor for that purpose. Section 10 requires that the examiners, after having made their investigation, shall “certify, under oath, that the capital herein required of the company named in the charter * * * has been paid in, and is possessed by it in money, or in such stocks and bonds and mortgages as are required by the 8th section of this act. ” And the same section provides that “the corporators and officers of such company shall be required to certify, under oath, that the capital exhibited to those persons is bona Jicle property of the company. ”

It is thus shown that at the time of this examination the custody of the capital is still in the hands of the original corporators, and their officers. From this it appears that they had power to appoint officers before there should be any directors. They would need a clerk or secretary to open the books and receive the subscriptions; they would need a treasurer, or other officer authorized to receive the cash, and safely keep it; they would need some executive officer or officers to invest the cash, or some part of it, if they chose so to do, in stocks and bonds, as authorized in section 8. That they had authority to make these investments, if they chose, is apparent from the fact that the examiners are not required to certify that the capital is possessed by the company in money or in cash, but the certificate required is, that it is possessed “in money, or in such stocks and bonds as are required by the 8th section of the act.” That the act contemplates the appointment of officers before this time, is plain from the language of section 10, providing that the capital thus possessed is to be exhibited to the examiners by “the corporators and officers of such company.”

The result of this examination being duly certified by two certificates to the Auditor of Public Accounts, it is made his duty to “deliver to such company a certified copy of the charter and of said certificates, which, on being filed in the office of the clerk of the county where the company is to be located, shall be their authority to commence business and issue policies; and such certified copy of the charter and of said certificates * * * shall be conclusive evidence of the fact of the organization of such company. ”

All things are now in readiness for the management of this .business to-be transferred from the hands of the original corporators into the care and custody of trustees or directors, and the next thing in order would seem to be the election of trustees or directors in the mode prescribed by the charter; and the trustees or directors being elected and qualified, the duties of the promoters, organizers or corporators (by whatever name known) there end, and the duties of trustees or directors there begin. The trustees or directors are the successors of the original managers, called sometimes “corporators. ”

In the transaction of the business required to be done by these thirteen promoters, or original organizers, or “corpora-tors, ” there might be, and probably would be, a necessity for by-laws, to regulate the meetings of the promoters, to prescribe the duties of officers appointed by them, or for other purposes in connection with the collection of the tax, its safe keeping, its investment, and its exhibition to the examiners appointed by the Auditor.

After the directors or trustees assume control, other by-laws might be needed, or the by-laws already made might need amendment or alteration. Accordingly it is provided in section 11, “the corporators, or the trustees or directors, as the case may he, of any company organized under this act, shall have power to make such by-laws * * * as may be deemed necessary for the government' of its officers and the conduct of its affairs, and the same, when necessary, to alter and amend; and they and their successors may have a common seal, and may change and alter the same at their pleasure.”

Attention is called to the words in the foregoing section, “as the case may be.”' The provision plainly means that either the corporators or the directors, whichever may be engaged in the management of the business of the company for the time being, shall have power to make such by-laws, and the same to alter and amend.

By these provisions of the statute it is plainly made the duty of the original associates or corporators to take care that the capital of the company is all paid in, in cash, and a certificate thereof filed, before the management of the business is passed over to the hands of directors, and it is equally plain that it is the duty of the directors to take care that all this has been done before they enter upon the regular business of the corporation, and before any policies are issued, for the 10th section of the act says, that such certificate, on being filed, “shall be their authority to commence business and issue policies.”

Thus, we learn, that the capital mentioned in section 16, “as hereinbefore provided” to be paid in, is the amount of capital to be stated in the charter, as provided in section 4, and is that which, by section 6, is to consist of at least $150,000 for a stock company in Chicago; and is that which, by section 7, is required to be fully subscribed before the books for subscriptions are to be closed by “the individuals associated for the purpose of organizing any company under this act;” and is that which, by section 8, may be lawfully invested in bonds, mortgages and stocks described in that section; and is that which the examiners appointed by the Auditor are required, by section 10, “to certify, under oath, that”-it “has been paid in and is possessed by” the company “in money, or in such stocks and bonds and mortgages as are required in the 8th section of this act; ” and is that capital of which, by the 10th section, it is said, “the corporators and officers of such company shall be required to certify, under oath, that the capital exhibited to those persons” (the examiners) “is bona fide property of the company. ” We also find, as to the manner of its being paid in, that by section 6 it is to be paid in in cash.

As to the “certificate thereof, ” mentioned in section 16, it plainly means a certificate of the fact that the capital had been paid in, in cash. This must refer either to the certificate of the examiners to be made to the Auditor, or to the certificate of the Auditor, being a certified copy of the charter and of the certificate made by the corporators and officers as to the capital exhibited to the examiners, and of the certificate of the examiners,—that is, the document which is to be filed with the county clerk, and of which it is said, it “shall be their authority to commence business and issue policies. ” In my judgment it is this final certificate which is referred to in section 16.

There is no express provision for the recording of. any of these certificates, but I think by a fair construction the filing with the county clerk is to be taken to be the thing meant by the words, “and a certificate thereof recorded,” found in section 16.

We find, also, that the duties—for the failure in the performance of which the penalty in section 16 is imposed—consist, first, of the duty to see to it that all the capital mentioned in the charter was actually paid in, in cash; and .next, to see to it that the proper certificate thereof was filed with the clerk before any policies were issued. We find, also, that no part of these duties was imposed upon the mere stockholder, but we do find these duties are imposed upon the original thirteen organizers, and upon the trustees or directors.

From this review of the provisions of the foregoing section. I am led to the conclusion that the liability imposed in section 16 for a failure to see that the capital is all paid in, in cash, and a certificate thereof recorded as thereinbefore provided, upon the trustees and corporators of any company formed under this act, was intended to be imposed upon the original associates, who had authority “to associate and form an incorporated company, ” and upon the trustees or directors who succeed them in the management, these being the only persons upon whom the previous sections had cast any duties in relation to the matter in question.

The chief object of this section 16 was evidently to furnish, in the organization of such new companies, additional safeguards that no policies should be issued until the capital had all been actually paid in, in cash, and so a' penalty is provided, to be borne by those through whose wrong the general business should be begun in violation of law. If punishment is to be imposed for a default, it.must be taken (unless the contrary is expressly declared or shown by clear and necessary implication) that the punishment is to be imposed upon the persons in default, and not upon those who have no duty-imposed upon them in relation to the matter to which the penalty relates.

The original corporators, whose duty it is to receive the capital in cash and procure the final certificate from the Auditor, necessarily know whether these duties have been performed. The trustees or directors, when they take charge of the capital, receiving it from the corporators, have the means of ascertaining whether the capital has been in fact all paid in, and whether the necessary final certificate has been procured and filed with the county clerk. When they receive the custody of the capital from the corporators, they can examine the cash, and the investments, if any part of it has been invested in stocks or bonds. If they go on without knowing that all this has been done, and that it has been so certified, it is reasonable that they should be made responsible, until the affairs of the company are put in the condition required by the statute. But it is not reasonable that a man who has merely subscribed for certain shares of stock, and has paid in the cash for súeh shares, should be thus charged, when he has neglected no duty imposed upon him by law. It is true, he might look in the clerk’s office and see whether the certificate required has been filed, but such is not usually regarded as the duty of a mere stockholder. He may have the right to inspect the books, but he has no right to count the money in the safe, so as to determine whether or not all other stockholders have in fact paid in their dues.

There is another reason which leads me to think that the word “corporators,” as used in section 16, is not intended to mean stockholders. This word “corporators” is used in many parts of this statute, and in no instance, in any provision in relation to a stock .company, is this word “corporator” used to mean stockholder, unless it be in this section 16, and in many parts of the act prdvisions are found which do relate to the mere owners of stock in a stock company, and in every instance where mere shareholders are spoken of they are designated as “stockholders.” They are .spoken of by that designation in twelve different places in the act, and mere shareholders are not mentioned in any part of the act by any other description, unless it be by the term “corporators,” as found in this section 16. If my construction of the meaning of the word “corporators” in section 16 be right, it will then be found that the word “corporators” in this act, in every single instance, is used to mean the original associates or promoters of a new corporation, and is nowhere used in the act in any other sense. It is also true, that wherever in the act reference is had to a mere member of a corporation, if the reference relates to a stock company, they are everywhere called “stockholders,” and where the reference relates to a mutual company, they are everywhere called “members of” the corporation.

My construction of the meaning of this word “corporators” is fortified by the decision in the case of Chase v. Lord, 6 Abbott, (N. C.) 268, made by the court of last resort in the State of New York,—the Court of Appeals.

Our statute of March 11, 1869, is plainly modeled after the statutes of New York, in force at the time of its passage. In fact, most of its sections, and clauses in nearly all of its sections, are copied verbatim from the statutes of New York. In New York the comptroller performs the duties imposed on the Auditor by our statute. In New York only a given portion of the capital of joint stock companies is required to be “raised” in cash before the commencement of ordinary business. By the statute of New York there is a preliminary inspection by examiners appointed by the comptroller, and a filing of certificates as required in our statute. In the sections directing the mode of organization, in their statute, as in ours, there is no express provision directing any certificate to be recorded. In New York the statute has a section saying: “The trustees and corporators of any company organized under this act * * * shall be jointly and severally liable until the whole amount of the capital raised * * *■ shall have been paid in, and a certificate thereof recorded as hereinbefore provided. ”

It will be observed that we have copied even the blemishes of the New Tork statute, by speaking of a recording as being “hereinbefore provided, ” when in neither statute is anything but filing spoken of in the previous sections.

It was sought in Chase v. Lord, supra, to charge a stockholder of a company formed under their general statute with a debt of the corporation, incurred when the whole of that part of the capital required to be paid in, in cash, or “raised, ” had not been so paid in. The Court of Appeals held that the word “corporators, ” in their statute, did not signify “stockholders,” and said: “The corporators are the associates who are the getters up of the company, and whose functions cease with its organization. * * * Corporators exist before stockholders, and do not exist with them. When stockholders come in, corporators cease to be. Corporators are liable if they launch the company withojit complying with the law. ”

Now, what are the reasons suggested for a different construction of the word corporators in this section 16 ? It is first said, that the constitution of 1848 (in force when this act of 1869 was passed) declares, that “dues from corporations * * * shall be secured by such