author: Mr. Justice Mulkey

text:
    James S. Jewell et al. v. The Rock River Paper Company et al.

      Filed at Ottawa November 10, 1881.

    1. Corporation—articles of association—evidence that capital stock has been subscribed. The articles of association of a corporation, certified" by the Secretary of State, are prima facie evidence of the fact that the full amount of the capital stock required by the articles has been subscribed, and is sufficient proof of that fact until overcome by rebutting evidence.
    2. Same—subscriber estopped by his fraud from questioning the right to fill up blank as to amount. If a party signs a subscription book for stock in a contemplated corporation, merely to induce others to subscribe the same, leaving the amount of his own subscription blank, it is but fair to hold that, as to creditors of the company, he thereby impliedly authorizes those empowered to take subscriptions to fill up the blank, and that when done such subscriber will be estopped from questioning them authority to do so.
    3. Same—fraud in its formation will not affect creditors. If a new corporation is organized by parties interested in an old one, for the purpose of getting rid of its liabilities and fastening them upon the new company, and the latter, by arrangement with the creditors of the former company, bids off the property of the old company for the amount of its liability, and gives its notes therefor to such creditors, secured by deed of trust, the fraud, if any, on the part of those representing the old company, can not affect the creditors, and these facts will constitute no defence to a suit to compel the stockholders in the new company to pay their unpaid subscriptions to satisfy the liabilities thus assumed by the new company.

      4. Same—creditors not affected by fraudulent arrangements between subscription agent and subscribers. The creditors of a private corporation organized under the general law of 1872, can not be affected by a mere private understanding between the subscribers and the subscription agent of the company, by which the former are exonerated from the payment of their subscriptions, wholly or in part, contrary to its .terms, nor by the fact that many of the subscribers at the time of subscribing were notoriously insolvent; and such facts constitute no defence to the collection of subscriptions from solvent parties for the benefit of creditors of such company.
    5. SAin;—inconsistent parol agreement is void. A parol agreement, made at the time of a written subscription to the capital stock of a private corporation, with some of the subscribers, by the subscription agent, that their subscriptions shall not be collected, or shall be collected only in part, or may be paid in services, being inconsistent with the written contract, is void as to the other subscribers and creditors of the company.
    6. Chancery practice—parties' when concluded by master’s report. Where matters of fact are referred to a master, it is the duty of the parties, when notified, to appear before him and there contest the matter, and if his findings are not correct in their judgment, it is their duty to interpose their objections, so as to afford the master an opportunity to modify his report, if wrong. If on such hearing the master declines to change his report, the objecting party must file exceptions to it when it is filed. When this course is not pursued, and no sufficient reason is assigned for not doing so, the master’s report, when approved by the court, -will in this court be deemed conclusive upon the questions covered by it.
    Appeal from the Appellate Court for the First District;— heard in that court on appeal from the Superior Court of Cook county; the Hon. John A. Jameson, Judge, presiding.
    Mr. John H. Hamline, for the appellant James S. Jewell:
    1. The full amount of capital stock demanded by the articles of association of the Chicago Publishing Company was never subscribed, and the company was never legally organized in accordance with the act concerning corporations. Ullman v. Havana and Rantoul R. R. Co. 88 Ill. 521; Pitchford v. Davis, 5 M. & W. 2; Bray v. Farwell, 81 N. Y. 600; Fox v. Clifton, 6 Bing. 776; Salem Mill Dam Corporation v. Ropes, 6 Pick. 23; Cabot and West Springfield Bridge Co. v. Chapin et al. 6 Cush. 50; Stoneham Brand R. R. Co. v. Gould, 2 Gray, 277; Littleton Manufacturing Co. v. Parker,
      14 N. H. 543; Old Town and Lincoln R. R. Co. v. Veazie, 39 Maine, 571; Sanford v. Handy, 25 Wend. 475; Thompson on Liability of Stockholders, sec. 120, and cases cited; Swartwout v. Michigan Air Line, 24 Mich. 396; Mokelume Hill Manufacturing Co. v. Woodbury, 14 Cal. 424; Fire Dept. of New York v. Kilp, 10 Wend. 266.
    2. The appellant is not estopped from showing this. Cross v. Pinckneyville Mill Co. 17 Ill. 54; Slocum v. Providence Steam and Gas Co. 10 R. I. 113.
    3. The ease being' distinguished from the following cases, for the reason that the acts of appellant have given no ground for estoppel, while in the latter cases the defendant has invariably done some act himself affirming the existence of the corporation. Rice v. Rock Island and Alton Railroad Co. 21 Ill. 93; Tarbell v. Page et al. 24 id. 46; Thompson v. Candon, 60 id. 244; McCarthy v. Lavasche, 89 id. 275; Dows v. Naper, 91 id. 44; Chubb v. Upton, 5 Otto, 666; Corwith v. Culver, 79 Ill. 502.
    4. The majority of the stock purporting to have been subscribed was fictitious, and hence the capital stock of the Chicago Publishing Company was not fully subscribed, and the company was not legally organized. Angelí and Ames on Corporations, (9th ed.) sec. 86; McConaby v. Centre Turn. Co. 1 Pa. 426; Jersey City Gas Co. v. Dwight, 29 N. J. Eq. 242.
    5. Appellants’ contract was a conditional one, and the conditions expressed on the face thereof have not been complied with. Thompson on Liability of Stockholders, secs. 116, 117, 118, and cases cited; Chase v. Sycamore and Courtland R. R. Co. 38 Ill. 215 ; Melvin v. Lamar Ins. Co. 80 id. 459; Jersey City Gas Co. v. Dwight, 24 N. J. Eq. 242; McConaby v. Centre Turn. Co. 1 Pa. 426.
    6. Appellant not being a member of the corporation, the books were not evidence against him. Chase v. Sycamore and Courtland R. R. Co. 38 Ill. 215.

      Mr. William C. Wilson, and Mr. David L. Zook, for the other appellants:
    1. The entire capital stock of the alleged company was never in fact fully subscribed, and until that was done there could be no organization or transaction of business in the name of the company. . Bray v. Farwell, N. Y. Court of App. ; Ullman v. Havana and Rantoul R. R. Co. 88 Ill. 521.
    2. Many of the subscriptions were fraudulent upon the other subscribers. The subscribers were insolvent, and known to be so to appellees. Angelí & Ames on Corporations, (10th ed.) sees. 88, 517; 1 Pa. 426.
    3. The corporation had no authority to buy the subscription list, good will, and old debts due to the Post and Mail Printing Company. The notes given- for the purchase money were ultra vires, and imposed no obligation whatever. Re Saxon Life Ass. Society, 2 J. & H. 400; on appeal, 1 De G. J. & Sm. 29 ; on rehearing, 1 H. & M. 672; Ernest v. Nicholls, 6 H. of L. Cases, 401; Ashbury Railroad Carriage Co. v. Riche, L. R. 7, Eng. and Irish App. 653; East Anglican Ry. Co. v. Eastern Counties Ry. Co. 11 C. B. 775; Re Empire Asswrance Co. L. R. 8 Ch. 340.
    4. At the time of the alleged assumption of said indebtedness no stock was held in said corporation by any of these appellants, nor have they ever held or owned any stock, and no liability can be incurred by them or imposed upon them in the absence of stock. Baker et al. v. Admrs. of Backus, 32 Ill. 79; Steele v. Dunne, 65 id. 298; Rev. Stat. 282, sec. 8.
    5. Unless a subscriber ratifies with a full knowledge, he is not bound. Angelí & Ames on Corporations, see. 517.
    6. A false and fraudulent representation by an agent or commissioner, to obtain subscriptions to the stock of the company, will avoid the subscriptions. Crossman v. Penrose Ferry Bridge Co. 26 Pa. St. 69.

      Mr. A. H. Lawrence, for the appellees:
    The appellants are concluded by the approval of the master’s report, as to all the findings of facts by him. The exception by White, after the report was filed, was too late. The report can not be questioned here for the first time. Reigard v. McNeil, 38 Ill. 401; Clark v. Laughlin, 62 id. 278; McClay v. Norris et al. 4 Gilm. 386; Prince v. Cutler, 69 id. 267; Pennell v. Lamar Ins. Co. 73 id. 303; Hurd v. Goodrich, 69 id. 450; M. E. Church v. Jacques, 3 Johns. Ch. 77.
    It was inadmissible for defendants to show that their subscriptions were in fact qualified and limited by parol conditions. Corwith v. Culver, 69 Ill. 506; Melvin v. Lamar Ins. Co. 80 id. 456; Graff v. Pittsburg and Steubenville R. R. Co. 31 Pa. St. 489; Robinson v. Pittsburg R. R. Co. 32 id. 339; Downie v. White, 12 Wis. 176; Mann v. Cook, 20 Conn. 178; White Mountain R. R. Co. v. Eastman, 34 N. H. 124; Johnson v. Crawfordsville R. R. Co. 11 Ind. 280; Blodgett v. Merrill, 20 Vt. 509; Pickering v. Templeton, 2 Mo. App. 425; Thornburgh v. Newcastle R. R. Co. 14 Ind. 499.
    Every subscription to the capital stock of a company is a separate and independent contract. Price v. Grand Rapids R. R. Co. 18 Ind. 137; Conn, and Pass. R. R. Co. v. Bailey,. 24 Vt. 465; Hatch v. Dana, 11 Otto, 210.
    Having taken part in the proceedings of the company, paid stock assessments, and in various ways recognized the existence of the company, appellants above named are, by such acts on their part, estopped from questioning the legality of the organization of the company, or their liability as stockholders therein. Thompson on Liability of Stockholders, secs. 162, 163, 164, 165, 170; Black River and Utica R. R. Co. v. Clark, 25 N. Y. 208; Maltby v. Northwestern Va. R. R. Co. 16 Md. 422; Hager v. Cleveland & Bassett, 36 id. 476; Frost v. Walker, 66 Maine, 468; Dayton and Cin. R. R. Co.
      v. Hatch, 1 Disney, 84; Corwith v. Culver, 69 Ill. 506; Central Plank Road v. Clements, 16 Mo. 359.
    Appellants having suffered the company to hold itself out to the world as a legally created body corporate, they can not, as against creditors, attack the organization of the company. This can not be done in a collateral proceeding. Angelí & Ames on Corporations, secs. 635, 636; Swartwout v. Mich. Air Line R. R. Co. 21 Mich. 389; Slocum v. Providence Steam Co. 10 R. I. 112; Slocum v. Warren, 10 id. 116; Tarbell v. Page, 24 Ill. 46; Price v. Rock Island and Atchison R. R. Co. 21 id. 93; Thompson v. Candor, 60 id. 244; McCarthy v. Lavasche, 89 id. 270; Dows v. Naper, 91 id. 44; Chubb v. Upton, 5 Otto, 665.
    This being a suit by creditors against stockholders, to enforce payment of their unpaid stock subscriptions, it is no defence for such stockholders to say they were induced to subscribe by false and fraudulent representations made to them by the company, or by Willard, its agent. Ogilvie v. Knox Ins. Co. 22 How. 380; Upton v. Tribilcock, 91 U. S. 45; Chubb v. Upton, 95 id. 667; Payson v. Withers, 5 Biss. 269; Litchfield Bank v. Church, 29 Conn. 137; Clark v. Thomas, 34 Ohio St. 46; Ruggles v. Brock, 6 Hun, 164 ; Goodrich v. Reynolds, 31 Ill. 490.
    Messrs. Dupes & Judah, also for the appellees.
   Mr. Justice Mulkey

delivered the opinion of the Court:

This is an appeal from a judgment of the Appellate Court for the First District affirming a decree of the Superior Court of Cook county, in favor of appellees, as creditors of the Chicago Publishing Company, and against the company and certain of its stockholders, to recover from the latter unpaid subscriptions to its capital stock.

The company was organized under the general Incorporation act of 1872, entitled “An act concerning corporations, ” in the latter part of the winter of 1878, with 0. A. Willard, since deceased, as its president and business manager. The statement filed with the Secretary of State, as required by the second section of the Incorporation act, shows the company was organized for the purpose of doing a general printing business, including the publication of a newspaper in the city of Chicago, the business place of the company, and that its capital stock was limited to $150,000, being divided into 1500 shares, of $100 each. Its organization, so far as we are able to discover, seems to have been in strict conformity with the statutes. It was evidently the purpose of - the promoters of this company that it should, as it subsequently did, supersede the Post and Mail Printing Company, an existing organization then engaged in the same business, proposed to be conducted on a more extensive scale by the new company, under whose management a daily newspaper, known as the “Chicago Post, ” was then being published, the said 0. A. Willard being the president and general manager of that company also.

At the time of the organization of the new company the Post and Mail Printing Company was indebted to various individuals in the sum of $45,000, which indebtedness was represented by forty-five notes of the company, for the sum of $1000 each, and all secured by a deed of trust executed by the company to Arnold Tripp, as trustee, on the entire assets of the concern, ten of these notes belonging to appellee the Rock River Paper Company. Default having been made in the payment of these notes, the trustee, at the instance of the holders, proceeded to advertise for sale the mortgaged property. Pending this advertisement, to-wit, on the 28th of February, 1878, there was a meeting of the directors of the Chicago Publishing Company, at which a resolution was passed by the board authorizing and directing 0. A. Willard, the president of the company, to bid at the trustee’s sale the sum of $45,000 for the property, franchises, etc., of the Post-Mail Printing Company, to be paid two years after date, with interest at the rate of ten per cent per annum, payable semiannually, and to be secured by a mortgage on the property purchased. This resolution seems to have been adopted in pursuance of an arrangement which had already been made with the holders of the notes of the old company, to the effect that they would accept in payment of the indebtedness of the latter company the notes of the new company, of the character specified in the resolution. The effects and franchises of the old company were accordingly purchased at the trustee’s sale, in pursuance of the above resolution and the understanding with the .creditors of the old concern. The old notes were surrendered, and new ones given to the holders by the new company, which were secured by a deed of trust on the purchased property, as above stated, and from thenceforth the old company abandoned its organization and ceased to do business. On the 17th of March following, Oliver A. Willard, the president and business manager of the Chicago Publishing Company, died, and from thence until the filing of the bill in this case the stockholders of the company seemed to lose all interest in its success, and its affairs gradually grew worse, until it drifted into insolvency, and all its tangible effects, with the exception of some accounts, were sold under the deed of trust above mentioned, when it ceased to do business, and a receiver, under the present bill, was appointed to wind up its affairs. The -record shows that many of the subscribers to the capital stock were at the time of their subscriptions, and still are, insolvent, and that but a small portion of the stock had been paid in before the commencement of the suit.

Answers were filed by appellants and some of the other defendants, alleging, in substance, the whole of the capital stock had not been subscribed; that many of the subscriptions were colorable, merely, and that the parties making them were notoriously insolvent, of all which appellees had notice; that the proposed organization of a new company was but a scheme devised by the managers of the old one to saddle the debts of the old concern upon unsuspecting subscribers who might be induced to take stock in the pretended new company, etc. The other defendants failed to answer, and were regularly defaulted.

The cause was referred to the master, whose report shows the total amount due from all the stockholders, the amount due from the solvent stockholders, the total amount of the company’s indebtedness, and the names of the persons having claims against the company, and the amounts due them, respectively; and also, that after exhausting all the debts due from the solvent stockholders there will be an unpaid balance due from the company of $14,473.66, unprovided for. Although such of the stockholders as interposed a defence to the bill were notified to appear before the master, for the purpose of taking such steps as they might deem proper with respect to the report of that officer before filing it in court, none of them appeared before him for such purpose, or took any exceptions to it, until after it was filed in court, and only one of the defendants, namely, appellant Hugh A. White, filed exceptions to it at all. The report of the master was approved by the court, and a final decree entered in accordance with its findings. From that decree sixteen of the defendants appealed to the Appellate Court, and the cause was there heard, resulting in an affirmance of the decree of the Superior Court. All of the defendants seem to have acquiesced in the judgment of the Appellate Court except James S. Jewell, David R. Dycke, Hugh A.White, and Thos. C. Hoag, the present appellants, who bring the record to this court for review.

Various’ reasons are assigned why the judgment of the Appellate Court should be reversed, none of which are deemed sufficient.

It is first objected that the full amount of capital stock required by the articles of association before it could become a legally organized body, was never subscribed. Assuming this objection, if true, could be made available under the circumstances of this case, of which w¿ deem it unnecessary to express any opinion, we are satisfied, from the proofs before us, the requisite amount of capital stock was subscribed. The articles of association certified by the Secretary of State, afford prima facie evidence of the fact, which has not, in our judgment, been overcome by anything appearing in the record tending to establish a contrary conclusion. This part of the controversy is narrowed down to the subscriptions of White, Miller and Culver. So far as the latter is concerned, we find no evidence at all tending to overcome the prima facie case made by the certified articles of association. As to Miller and White, they both admit having signed their names to the subscription book, in the list of the other subscribers, but deny having carried out the amount of their subscriptions in figures, and claim that they signed their names for the purpose, simply, of enabling Willard to exhibit them to others in his efforts to obtain subscribers, it being supposed, as we take it, that the mere sight of their names, without anything more, would be a strong incentive to others - to subscribe. We frankly confess our inability to perceive the force or plausibility of this theory, however prominent or influential the parties may be. The more natural theory is, that if the amounts of their subscriptions were not carried out at the time, and were purposely left blank, the object in doing so was to enable Willard to represent them as subscribers when they were not, which would have been a palpable fraud on those subscribing through such an influence. It is well known that in becoming a party to an enterprise of that kind one is generally controlled, in a large degree, by the character of those who are, or who are expected to be, identified with it. Any artifice or trick, therefore, tending to mislead a subscriber in this respect would be highly reprehensible in morals, as well as a legal fraud. If,, then, appellants signed the subscription book of the company in blank for such purpose, it is but fair and just to hold that as to creditors of the company they thereby impliedly authorized those empowered to take subscriptions to fill up the blanks, and that having been done in this case, as is claimed, appellants are estopped from questioning their authority to do so. The Superior and Appellate Courts both found the requisite amount of stock was subscribed, and that the company was properly and legally organized, and we think the evidence fully warranted them in doing so.

Again, it is claimed that the Post and-Mail Printing Company was hopelessly insolvent, and that the organization of the new company was a mere shift or device to relieve those representing the old company and fasten its liabilities upon the stockholders of the new. We see no satisfactory evidence in the record to support this hypothesis. From a careful consideration of the whole of the testimony we are unable to say the assets of the old company were not, at the-time it was superseded by the new, fully equal to its liabilities; but if they were not, it is difficult to perceive upon what legal hypothesis the creditors of the present company can be affected by that fact. By a resolution of the board of directors of the new company, its president was directed to purchase the effects of the old company at $45,000, which was accordingly done, and by a mutual arrangement between all parties interested, this $45,000 was paid by taking up and discharging the notes of the old company to that amount. In all this we do not see the slightest evidence of bad faith or unfair dealing.

• It is also urged that a large portion of the stock of the present company is colorable and fictitious,—that the subscribers, in some instances, were notoriously insolvent, and in others it was expressly understood that payment was not expected or to be exacted, in other cases only a part of the 'subscription was to.be paid, and in some instances payment was to be made in services of some kind instead of money. While it must be conceded there is some evidence tending to establish this claim, yet there are two sufficient reasons why it can not avail here: In the first place, it is clear that the creditors of the company can not be affected by mere private understandings between the subscriber and the subscription agent of the company, by which the former is exonerated from the performance of that which his subscription, by its very terms, plainly requires. To permit such a thing would be to sanction a palpable fraud upon the creditors of the company and the other stockholders. In the next place, we do not regard either of the appellants in a position to question this matter, even if it constituted a defence. It was by the court referred to the master for his consideration, and his report shows the total amount due from solvent subscribers, including the subscriptions of appellants, and no objections were made to that report before the master, and no exceptions were taken to it after it was filed in court, except by White, and, under the. circumstances, he is in no better position than the others, for it is well settled that where matters of fact are referred to a master for his determination, it is the duty of the parties, when notified, as was done here, to appear before him and there contest the matter, and if his findings are not, in their judgment, supported by the evidence, it is their duty to interpose their objections, so as to afford 'the master an opportunity to modify his report if it should happen to be wrong; and if in such case, after hearing the objections, the master declines to modify or change his report, it is the duty of the objecting parties, after it has been filed in court, to appear there and file exceptions to it; and when this course has not been pursued, and no sufficient reason is assigned for not doing so, as was the case here, the report of the master, when approved by the court, will he deemed in this court conclusive upon the questions covered by it. Hurd v. Goodrich, 59 Ill. 450; Pennell v. The Lamar Ins. Co. 73 id. 303.

The fact that Willard was a man of limited means, and was a large subscriber to the enterprise, we regard, under the peculiar circumstances of this case, of no significance. It was a matter of public notoriety that he was chief editor of the “Post, ” and president and general manager of the old company, and it can hardly be doubted that all who subscribed to the new enterprise knew that it was intended to supersede the old company in the same business, and that one of its chief objects was to make the “Post” a success, and establish it upon a solid basis; and there is just as little doubt that the subscribers looked more to the personal qualifications of Willard, as editor of the paper and general manager of the business, for the accomplishment of those objects, than to his subscription to the capital stock. While it satisfactorily appears that in his great anxiety to perfect the new organization for the accomplishment of the objects just stated, he entered into private agreements with some of the subscribers which were inconsistent with the contract of subscription actually signed by them, and were therefore inoperative and void as to other subscribers and creditors of the company, yet in the light of all the facts before us we have no idea that any actual fraud was intended. In view of the fact that death has closed his lips so that he can not now speak for himself, it is more charitable to suppose that these things were attributable rather to an honest belief that the final success of the enterprise would make all things right, than to a deliberate purpose to injure or wrong any one. However this may be, we are satisfied none of these things furnish a sufficient reason for reversing the judgment in this case, and it will therefore he affirmed.

Judgment affirmed.


source: Caselaw Access Project

author: Mr. Justice Walker

license: Public Domain

text:
    Dominicus Brix v. Aaron Ott.

      Filed at Ottawa November 10, 1881.

    1. Specific febfobmanoe—requisites of contract to authorize decree. To authorize the specific performance of a contract it must be complete, specific and certain, as well as fair and honest,—not the result of mistake,—• and must have been fully performed, or an ability and a readiness and an offer to perform, on the part of the party seeking its enforcement, must be shown.
    2. Same—part performance and readiness to perform essential. A part performance at least, with a readiness to perform the remainder, on the part of the compiainant, is indispensable to authorize the specific enforcement- óf a contract.'
    31 OóNTBACT-^Tieíi void for want of certainty in description. A contract was as follows: “This is to certify to an agreement between D. B. and myself, that he is to bid -off the land now advertised by myself, and sold on Monday next, and give up same on following terms, namely: to have two acres at spring, each side of spring, one to make a square; and also to have use of surplus water flowing from springs west of road; and two acres south of spring on hill, to be used for waterworks,- and to be in my use until he needs it,” signed “A. H. Ott” and “ D. Brix, M. D.,”—when the facts were that Ott had never advertised the same for sale, but it was advertised for sale by another person for a debt due one’Y, under a trust deed, and it appeared there were several springs on the land advertised, and that Brix failed to bid off such land, when it was struck off to Ott: Held, the contract was too vague and uncertain, both as to the land out of which the parcels were to be taken and retained, and as to their location and shape or form, to be specifically enforced.
    4. Tendeb—what it fldmits. A-tender of any kind is-only an admission to its extent, and no further. When made it only admits the fact of the tender, with all of the conditions, limitations and terms at the time' imposed. Therefore the tender of a deed for land or interest therein binds the party making it to its terms and conditions, and no further.
    Wbit of Ebbob to the Circuit Court of Henry county; the Hon. John J. Glenn, Judge, presiding.
    - The plaintiff in error, the complainant below, owned a tract of land near Geneseo, -on which were several valuable springs. He conveyed it by trust deed to one Steel, to secure a debt of $3500 to one Young, which he was unable to pay, and the premises were advertised for sale by the trustee,— sale to be on Monday, February 17,1879. Anxious to reserve the springs, which he regarded as possessed of medical properties, and with regard to which he had some plans, he tried to find a purchaser who would take the land for the debt and leave him the ownership of the springs and a small portion of the ground. After several weeks negotiation he came to an agreement with the defendant, which appears in the. opinion. This writing was made February 15, 1879,— the Saturday before the sale. The parties attended the sale together. When Steel, acting as trustee, cried the land, Brix made no bid, and after a pause Ott bid it off for the debt and costs. Brix says that it was understood between them that Ott should bid it off and have it for the debt and costs, and that he was himself only to bid against persons offering more. Ott denies that there was such an understanding, but admits that he got the land for precisely what he agreed to give.
    Ott testified that he considered himself released from all obligations by the failure of Brix to bid. A few days after his purchase he mortgaged the premises to Mary E.Bell, without reference to Brix or notice to her of Brix’s claim. In a short time, however, he went with Brix to the ground, and they measured the distance from the spring to the top of the hill—1200 feet. Several months elapsed, and Brix insisting upon a deed Ott tendered him a conveyance of a right to use the premises for waterworks only. Brix refused, for two reasons : first, that the deed was a quitclaim deed, and Ott, since obtaining the title, had incumbered the premises; and second, because the deed conveyed only an easement, instead of the land itself.
    Brix filed his bill to compel a conveyance of the land, with proper covenants against the incumbrance, A demurrer was sustained 'to the bill, on the ground the contract was too vague to be enforced, whereupon Brix amended by praying in the alternative that if the contract should be found too vague to be enforced, it might be rescinded and the land restored after a proper account of Ott’s expenditures and receipts, and with due regard to the rights of his mortgagee.
    Mr. Geo. W. Shaw, for the plaintiff in error,
    argued upon the facts, insisting that the contract was sufficiently certain, and that Brix had substantially performed on his part.
    Counsel contended that this case is much stronger than Fowler v. Redican, 52 Ill. 405, where a contract more defective than this was held sufficient to compel a conveyance.
    The tender of the deed admitted defendant’s liability, and disposed of all his pretended defences. Monroe v. Chaldick, 78 Ill. 429.
    If Brix substantially complied with his contract he was entitled to relief, even if the contract had been too vague for enforcement. In such cases courts rescind the contract and place the parties in their former position. Fry on Specific Performance, 311; Henry County v. Winnebago Sp. Dge. Co. 52 Ill. 461.
    Mr. Charles Dunham, for the defendant in error:
    A contract, to be specifically enforced, must be complete, specific and certain, as well as fair and honest, and not the result of mistake, and not voluntary, and must have been fully performed on the part of the person seeking its enforcement. Fry on Specific Performance, p. 154, (*90, sec. 203,) et seq. 159, 165, (*102,) 166, 168, 169; Fitzpatrick v. Beatty et al. 1 Gilm. 454; 1 Story’s Equity, secs. 764, 767, 769, 776; Parkhurst v. Van Cowrtlandt, 1 Johns. Ch. *274; Gosse v. Jones, 73 Ill. 508; Bowman v. Cunningham, 78 id. 48.
    To avoid the Statute of Frauds the written agreement must contain all the essential terms, and leave no such terms to be proven by oral evidence. Parkhurst v. Van Courtlandt, 1 Johns. Ch. 274; Fry on Specific Performance, pp. 228-30 (*159); 1 Sugden on Vendors, pp. 237, 238.
    The description of the subject of the contract must be so definite that it may be known with certainty, and if insufficiently described, oral evidence is inadmissible to show what lands the parties meant, upon a bill for specific performance. Fry on Specific Performance, 157, 158, note 4; Richardson v. Godwin, 6 Jones’ Eq. 229.
    Patent ambiguities can not be aided by oral evidence. 2 Starkie on Evidence, 544, 548, 562; 1 Sugden on Vendors, p. 259, and cases before cited.
    The contract can not be partly in writing and partly in parol, both made at the same time, or the written part last. Howe v. Barker, 3 Johns. 509; Story’s Equity, sec. 769; 1 Johns. Ch. 283, supra; Doyle et al. v. Teas et al. 4 Scam. 202.
   Mr. Justice Walker

delivered the opinion of the Court:

Plaintiff in error was the owner of a tract of land in Henry county, near the city of Geneseo, on which there are several springs. It- was incumbered by a trust deed to secure $3500, and for the payment of which the land was advertised to he sold on the 17th day of February, 1879. On the 15th- day of that month the parties .to this suit entered into this agreement :

“Geheseo, Ill., Fel. 15, '79.

“This is to certify to an agreement between D. Brix and myself, that he is to bid off the land now advertised by myself, and sold on Monday next, and give up same on following terms, namely: To have two acres at spring, each side of spring, one to make a square; and also to have use of surplus water flowing from springs west of road; and two acres south of spring on hill, to be used for waterworks, and to be in my use until he needs it.

A. H. Ott,

D. Brix, M. D.”

The sale occurred as advertised, but plaintiff in error failed to bid off the property, although present at the sale. Thereupon defendant in error bid, and became the purchaser for the amount of the debt and interest. Steel, the trustee, executed to him a deed, and he took possession and still retains it.

Defendant in error made a quitclaim deed for th.e use of two acres, embracing a spring, on the west line of the quarter, and two other acres, to be used for the erection of waterworks to supply Geneseo with water. He tendered this deed, but it was rejected. Plaintiff in error claimed a deed conveying the fee, and not a mere easement or use of the property described in the deed, and that the property had been incumbered by mortgage by defendant in error after the sale, and the deed was not therefore a. compliance with the contract. Plaintiff in error thereupon filed his bill for' a specific performance of the contract. He afterwards amended his bill, asking for a rescission and for an. assessment of damages in case the contract could not be decreed specifically performed. A hearing was had, and the circuit court dismissed the bill, and complainant prosecutes error to reverse the decree of the circuit court.

The question upon which the decision of this ease turns, is whether the'contract, by its terms, is sufficiently specific and certain to require a decree directing it to be specifically performed. The well and generally recognized rule is, that to be specifically enforced a contract must be complete, specific, certain, as well as fair and honest,—not the result of mistake of intention,—and must have been fully performed, or an ability and a readiness and an offer to perform his part, by the party seeking its enforcement. See Fitzpatrick v. Beatty, 1 Gilm. 454, Gosse v. Jones, 73 Ill. 508, and Bowman v. Cunningham, 78 id. 48. A part performance, at least, with a readiness to perform the remainder, on the part of the party complaining, is regarded as indispensable to authorize the enforcement of the contract.

This contract specifies no particular tract of land. But it is said that it refers to land advertised by defendant in error, and to be sold on the Monday following. But it may be replied there is no pretence that defendant in error had advertised any land to be sold on that or any other day. This land was then advertised by Steel to be sold on the next Monday, to pay a debt plaintiff in error owed to one Young, and in which, so far as the evidence shows, defendant in error did not have the slightest interest. Then how can it be said that this agreement, either directly or remotely, refers to that advertisement, or the land in controversy ?

But even if it could be.- conceded that the land might be ascertained by a reference to Steel’s advertisement, which we do not now decide, still the body of the agreement is altogether vague and indefinite as to the land to be reserved to or held by plaintiff in error. There is no general description of the land in which the specific lands claimed are situated. But if that could be found, then where will we commence to locate the two acres at the spring, or the two acres south of the spring on the hill ? Surely no surveyor, whatever his skill, could determine from the agreement. There are several springs, and who can possibly know which spring is referred to, by the agreement? There is nothing from which it can be ascertained. But if the spring referred to could be certainly known, where are we to start to locate the two acres ? The agreement says it is to be at and each side of the spring, and one to make a square. What to make a square ? If it is one side, which side, and what is the side of the spring? And what is to be the size and shape of the other side? This is, utterly indefinite as to the place, the form, or the beginning or ending of the lines bounding the tract to be embraced in the two acres.

As to the other two acres, its want of description is as apparent as the other. If we take the spring on the line and road on the east, then no part, or but a few inches, perhaps, or a few feet at most, of the two acres on the hill can lie south of that spring. Practically, it would all lie west of that spring. Then, if we take either of the other four springs lying west of the one on the east line, south of which shall the two acres be located ? Bu't if the hill extends but a short distance west of the second spring from the line, south of which of these two shall it be located ? And if located, on what part of the hill, and what shall be its shape ? None of these questions are answered by the contract, and all are presumed to know that a contract can not be partly' Written and partly verbal.

We are referred to the case of Fowler v. Redican, 52 Ill. 405, as an authority requiring the admission of extrinsic evidence to locate the two tracts. That ease differs widely from this in its essential facts. There, possession was taken, and valuable improvements made, under a written memorandum, which, if not sufficiently specific, and had been rejected, outside of the written memorandum there was a clear, specific and unambiguous verbal contract, under which the purchaser had entered into possession, made improvements, and paid a part of the purchase money. This was sufficient, independent of the written memorandum, and had it been wholly rejected, to authorize a decree for a specific performance. In that case the memorandum referred to verbal representations, which it was held might be proven because they were referred to by the memorandum. Moreover, that ease carries the doc-tine of such explanation to the extreme verge of the rule, and wre do not feel inclined to extend it to other cases not similar in character. This case is widely dissimilar, and the doctrine of that case is not therefore applicable to this.

It is urged that inasmuch as defendant in error tendered a quitclaim deed, he thereby admitted or specified the places where and the form in which the locations were to be made. A tender of any kind is only an admission to its extent, and no further. When made, it only admits the fact of the tender, with all of the conditions, limitations and terms at the time imposed. Nothing further can be inferred from it. It then follows that the tender of this deed only bound defendant in error to its terms and conditions.

We perceive no error in this record, and the decree of the court below must be affirmed.

Decree affirmed.


author: Mr. Justice Scott

text:
    Charlotte Lequatte et al. v. Stuart R. Drury et al.

      Filed at Ottawa November 10, 1881.

    1. Chancery—laches—when a bar to relief. Equity will not assist a party who has not been reasonably diligent in asserting his rights. Stale claims will not be encouraged, since by the lapse of time there must of necessity be great difficulty in arriving at the exact facts of the case; and this rule will be applied as a bar to relief sought against a trustee.
    2. On a bill for the partition of land in which the complainants claimed an equitable title, and that the defendant held the legal title in trust for them, which bill was not filed until thirteen years after the defendant obtained his deed, under which he had ever since claimed the land against all others, the defendant in his answer set up the laches and delay of the complainants as a defence: Held, that the laches, unexplained, was such as to constitute a bar to the relief sought.
    3. Error will no.t always reverse—exclusion of evidence. The exclusion of the testimony of a defendant, when called by the complainants to prove facts occurring before the death of a common ancestor under whom both parties claim, if error, is no ground for the reversal of a decree dismissing the bill, where the laches of the complainants has been such as to bar any claim to relief.
    Writ of Error to the Circuit Court of Rock Island county; the Hon. John J. Glenn, Judge, presiding.

      Messrs. Sweeney, Jackson & Walker, for. the plaintiffs in error:
    The court erred in excluding the testimony of Eli and Silas Drury, two of the defendants, when called by the complainant. Stuart E. Drury, by his answer, did not claim title as an heir or devisee of Isaiah Drury, but claimed the lands were conveyed to him with the consent of Isaiah Drury in his lifetime. His defence was, that he was a bona ficle owner, independent of all questions of heirship.
    The objection to the competency of the witnesses was based on sec. 2, chap. 51, Eev. Stat. 1874. This section is intended to apply to cases where the guardian, heir, etc., is a party to the suit in a representative capacity, and has no application to a case like this. Bivens et al. v. Harper, 59 Ill. 19; Branger et al. v. Lucy, 82 id. 91; Fischer v. Fischer, 54 id. 231; Pigg et al. v. Carroll et al. 89 id. 206.
    Messrs. Osborn & Curtis, for the defendants in error:

    The complainants not being able to recover in any event, owing to their laches and the staleness of their demand, this court will not reverse for a possible error in the exclusion of evidence, as it could not have done the complainants any harm.
    The laches of the complainants is such as to form a bar to any equitable relief. Story’s Eq. Jur. see. 1520; Rogers v. Simmons, 55 Ill. 76; Carpenter v. Carpenter, 70 id. 457; Hough v. Coughlan, 41 id. 133; Thompson v. Bruen, 46 id. 125; Alexander v. Hoffman, 70 id. 114; Brink v. Steadman, id. 241; Walker v. Douglas, id. 446; Roby v. Cassitt, 78 id. 639; McLaurie v. Barnes, 72 id. 73; Iglehart v. Vail, 73 id. 63; Fitch v. Williams, id. 92; Hedenburg v. Jones, id. 49; Cox s. Montgomery, 35 id. 396; Hall v. Fullerton, 69 id. 448 ; Dempster v. West, id. 613; Beach v. Shaw, 57 id. 25.
   Mr. Justice Scott

delivered the opinion of the Court:

The bill in this case was to have partition made among the several heirs, of the lands of which it is alleged Isaiah and Priscilla Drury were either the legal or equitable owners at the time of their death. Only as to a portion of the lands described in the bill is there any contention in this court, and as to them the bill was dismissed in the circuit court, and as to the residue a decree of partition was rendered by the court on the hearing. To the latter part of the decree no objection is made.

As respects the lands concerning which the bill was dismissed, complainants insist Isaiah Drury, at the time of his death, was the equitable owner. The legal title had been or was in Eli Drury, in trust, as it is alleged, for Isaiah Drury. It seems Eli Drury and Stuart E. Drury, or one of them, were indebted to one Andrews, since deceased, and to secure that indebtedness Eli Drury conveyed these lands to him. That indebtedness was afterwards discharged. Anticipating that his death might soon occur, Andrews desired to reconvey these lands, and accordingly he deeded the same to Stuart E. Drury, without the consent of' Eli Drury, as is charged in the bill. This conveyance by Andrews to Stuart E. Drury was made in’-1858, and since the death of Isaiah Drury, which occurred in 1854. Since that time Stuart E. Drury has held the legal title to these lands, under the deed from Andrews, claiming to be the owner, in opposition to all the other heirs of Isaiah Drury. The bill proceeds on the theory, although the legal title is in Stuart E. Drury, equitably these lands belong to the estate of Isaiah Drury, and partition should be made of them among his heirs at law.

The answer of Stuart E. Drury to the bill is under oath, and in it he denies that Isaiah Drury was the owner of these lands, or that the legal title to them was ever in Eli Drury in trust for him, as charged in the bill, but insists the legal title was in Eli Drury. in trust for respondent, and then explains how and for what purpose the lands were conveyed to Andrews, and then reconveyed to him. It is distinctly alleged in the answer of defendant, that Isaiah Drury, in his lifetime, knew of the conveyance of the premises to Andrews, and never claimed any interest in them after they had been redeemed from a certain sale by defendant.

Some questions of minor importance have been pressed on the attention of the court, but it is not deemed necessary to remark upon them, as it is thought best to place the decision on matters more nearly affecting the merits of the cause.

On the trial of the cause before the court, complainants offered as witnesses in their behalf, Eli and Silas Drury, two of defendants, who are heirs at law of Isaiah Drury, to prove facts in relation to the creation of a trust in these lands, and other facts occurring prior to the death of the common ancestor, as set forth in the bill. To the admission of the testimony of the witnesses offered, defendant Stuart E. Drury objected, on the ground the witnesses were parties to the suit, and heirs of the common ancestor, and therefore directly interested adversely to defendant interposing the objection, and who defends as heir at law of Isaiah Drury; which objection was by the court sustained. That decision is the only error insisted upon in the argument as a ground for the reversal of the decree of the circuit court.

It may be conceded, that under the decision of this court in Pigg v. Carroll, 89 Ill. 206, the witnesses called on behalf of complainants to testify concerning facts alleged in the bill as having occurred prior to the death of the common ancestor, were entirely competent for that purpose. Exactly what complainants wished to prove by the witnesses is not definitely stated. Assuming, however, the material facts alleged in the bill as having happened before the death of the common ancestor would be established by their evidence, still it is apparent no harm was in fact-done complainants hy the exclusion of the testimony, for the reason they have been guilty of such laches in asserting the rights they now claim that no decree could pass in their favor. Whatever rights complainants may have had in these particular lands came to them on the death of Isaiah Drury, in 1854, and certainly as early as 1858, when Andrews reconveyed the premises to Stuart E. Drury.

The bill in this case was not filed until April, 1871. A period of seventeen years since the death of the ancestor, and of thirteen years since defendant obtained a deed for the premises, under which he has claimed the title as against all others, was suffered to elapse before complainants undertook to assert any claim to any portion of the premises. The laches of complainants is distinctly insisted upon in the answer of defendant as a bar to any relief. The record, however, is absolutely barren of any evidence that even tends to explain or excuse the unusual delay that has intervened before asserting the rights complainants now claim in the premises. It is not shown complainants were ignorant of the situation of the property at the time of the death of the ancestor, and at the time of the making of the deed by Andrews to defendant. In the absence of proof to the contrary it must be assumed they were familiar with the transactions concerning these lands as they occurred, and if they were, they ought to have asserted the claim they now put forth at a time when the facts were fresh in the minds of the parties, and susceptible of satisfactory proof. Equity will not assist a party who has not been reasonably diligent in asserting those rights concerning which its aid is invoked. It is for this reason stale claims will not be encouraged, since by the lapse of time, there must, of necessity, be great difficulty experienced in ascertaining the exact facts as to the matter in controversy.

The doctrine of what the law calls laches, has been applied to cases of trust. 2 Story’s Eq. Jur. sec. 1520 a. Unreasonable delay, unexplained on the part of one asking equitable relief, has been held to be a bar to the relief sought, even against a trustee, in cases in this court. Rogers v. Simmons, 55 Ill. 76; Carpenter v. Carpenter, 70 id. 457. The case at bar comes within the principle of the cases supra, and the decree of the circuit court must be affirmed.

Decree affirmed.


author: Mr. Justice Sheldon

text:
    The Chicago Life Insurance Company v. The Auditor of Public Accounts.

      Filed at Ottawa November 10, 1881.

    1. Dissolution of insurance companies—constitutionality of act of 1874. The statute of 1874, which authorizes the Auditor to take proceedings for the dissolution of a life insurance company organized in this State under a special charter, granted prior to the passage of that act, whenever he shall be of opinion that such company is insolvent, or its condition is such as to render its further continuance in business hazardous to the insured therein, or to the public, or when the company has failed to comply with the rules, restrictions or conditions provided by law, is not unconstitutional, as impairing the obligation of contracts, especially when such a company has accepted an amendment of its charter, which declares that it shall not be deemed to exempt the company from the operation of such general laws as might afterwards be passed.
    2. Same—act whether special, regulating practice in courts. A statute for the dissolution of insurance companies for insolvency, etc., and providing the mode of procedure to have such corporations dissolved, which applies alike to all insurance companies, is not a special law regulating the' practice in courts of justice, within the prohibition of see. 22 of art. 4 of the constitution of 1870.
    3. Same—change of remedy against insolvent -compa/ny. The general Insurance law of 1869 provided, that on notice by the Auditor an insurance company should cease issuing policies, where its assets were not equal to its liabilities, until its funds should be made equal to its liabilities. In 1874, another and different penalty was provided for. insolvency, etc., viz: a dissolution of the corporation: Held, that the legislature had the right to change the penalty and remedy, and that the later law must govern.
    4. Same—evidence sustaining a decree of dissolution. By the charter of a life insurance company, $100,000 of stock had been subscribed as required, but only ten per cent thereof had been paid in, and the evidence showed that in 1867 the remainder was professedly paid by the notes of the subscribers, payable in nearly all cases on demand, and without interest, payment of which was never demanded, and which were in no way secured, under which the company proceeded to insure, and from 1871 to 1876 mgde false reports of a capital stock of $125,000 .paid up in cash, and during the same time made dividends, in violation of its by-laws, of $55,045, when it was in no condition to pay any dividends, and from 1873 to 1876 it scheduled securities, amounting to $89,422, which it had bought but had never paid for, and made false reports of its receipts and expenditures, and on examination of- its affairs and books they showed a heavy .deficiency of assets to meet its liabilities: Held, that a decree for the dissolution of the company was warranted.
    5. Same—unpaid securities are not assets. Securities taken in the name of an insurance company, in the expectation of becoming its property when paid for, but not paid for, are not bona fide assets of the company, and exhibiting them as such in the company’s report to the Auditor is deceptive to him, and to persons taking insurance, and to the public.
    6. Same—good will -is not assets. An insurance company can not establish its solvency, such as the statute requires, by proof that its good will is of the value of $100,000 to $150,000. This can not be treated as assets of the company. The assets required by law are funds that will pay losses and liabilities of the company.
    7. Same—deficiency of assets—how found. Under the Insurance law of 1869, where the actual funds of any life insurance company are not of a net value equal to the net value of its policies, according to the “combined experience,” or “actuary’s” rate of mortality, with interest at four per cent per annum, the Auditor is required to give notice, etc. Under this law it is not proper to estimate on the basis of six per cent in determining the impairment, but the four per cent basis as fixed in the law must govern as showing the deficiency of assets.
    8. Same—standard of solvency. The law requires a higher standard of solvency in an insurance company than that its assets shall be sufficient to meet and pay its matured liabilities. It requires that its assets shall be equal to all its liabilities, whether due or not.
    9. Same—offer to re-insure, no defence to proceeding to dissolve corporation. In a proceeding by the Auditor to have a life insurance company dissolved, under the general law of 1874, for insolvency, an offer by the company to re-insure in other companies for its policyholders is no defence, and can not be taken as making up the company’s deficiency of assets.

      10. Same—responsible for the acts of its officers. The fact that the mismanagement of an insurance company, making its condition such as to be hazardous to the public and parties insured, is attributable to the secretary alone, is no defence to a proceeding by the Auditor to close its business. The public are entitled to protection, no matter by whom the affairs of the company have been mismanaged.
    Writ of Error to the Circuit Court of Cook county; • the Horn Murray F. Tuley, Judge, presiding.
    Messrs. C. C. & C. L. Bonney, for the plaintiff in error, made the following among various other points:
    The act under which this proceeding was had impairs the obligation of the contract in their charter. Const, of the United States, sec. 10, art. 1; const, of Illinois, 1870, sec. 14, art. 2.
    The act contravenes sec. 22 of art. 4 of the State constitution, which declares that the legislature shall not pass special laws regulating the practice in courts of justice.
    The law of 1874 was not intended to apply to corporations formed under special charters prior to the adoption of the present constitution. Union Ins. Co. v. Frear Stone Mfg. Co. 97 Ill. 545; Wincock et al. v. Turpin, 96 id. 144.
    The legislature has no power to impose arbitrary and oppressive conditions upon the assertion and exercise of vested rights. Conway v. Cable et al. 38 Ill. 87.
    The law never favors forfeitures by construction. All laws providing forfeitures must be strictly construed. Chicago v. Rumpff, 45 Ill. 99; Hartford Ins. Co. v. Walsh, 54 id. 168; Baker et al. v. Admr. of Backus, 32 id. 109; First National Bank of Sioux City v. Gage et al. 79 id. 209.
    Definition of solvency: Burrill on Assignments, 38, 40; Bouviers’ Law Die. title “Insolvent. ”
    The right to pompel a substantial performance of the contract can not be taken away under a pretence of regulating the remedy. Walker v. Whitehead, 16 Wall. 317; Merton v. Valentine, 15 La. Ann. 153.

      The legislature has not the power to add new and independent conditions to a grant, such as a wider draw for a bridge than required by the original act. Commonwealth v. Breed, 4 Pick. 460.
    In a proceeding to forfeit corporate franchises, the alleged unlawful acts must be alleged to have been willfully or negligently done. Attorney General v. M. V. and C. R. R. Co. 51 Miss. 606.
    A temporary suspension of specie payment by a bank does not work a forfeiture of its charter, especially when a penalty of twelve per cent is provided. State v. Commercial Bank, 10 Ohio, 538.
    The legislature has no power to impose on corporations new causes of forfeiture subsequent to their charters. It may prescribe new modes of remedy, but can not change the conditions of the contract. Aurora Co. v. Hotthouse et al. 7 Ind. 61; Powell v. Sammons et al. 31 Ala. 558; State v. Noyes, 47 Maine, 214; People v. Jackson and Michigan Plank Road Co. 9 Mich. 285; State v. Tombeckee Bank, 2 Stew. (Ala.) 36; Bailey v. Railroad Co. 4 Harring. 399.
    A reservation of power to alter, modify or repeal a charter, does not authorize the legislature to impose an additional burden of expense, without compensation. Miller v. Railroad Co. 21 Barb. 513; Holyoke Co. v. Lyman, 15 Wall. 522.
    Mr. E. B. Sherman, for the defendant in error, among various others made the following points of law:
    The acts of 1869 and 1874 are constitutional and valid, and are not contrary to the constitution of the United States. Ward v. Farwell, 97 Ill. 593; Angell & Ames, sec. 774, and cases cited; Ohio and Mississippi R. R. Co. v. McClelland, 25 Ill. 140; Bank v. Willard, 24 id. 140; Moore v. Whitcomb, 48 Mo. 543; Munn v. People, 69 Ill. 93; Munn v. Illinois, 4 Otto, 113; In the matter of Jackson, 4 Sanford, 596; Slee v. Bloom, 19 Johns. 71; Slee v. Bloom, 5 Johns. Ch. 380;
      Gowen v. Penobscot R. R. Co. 44 Maine, 140; Inhabitants of Veazie v. Mayo, 45 id. 560; Gonvmomvealth v. F. and M. Bank, 21 Pick. 542; Com. Bank of Rodney v. State, 4 S. & M. 439; Missouri v. Matthews, 44 Mo. 523; Bank v. Attorney General, 3 Wend. 588; Tennessee v. Sneed, 6 Otto, 69; Fertilizing Co. v. Hyde Park, 7 id. 659; Turnpike Co. v. People, 82 Ill. 174; United States v. Union Pacific R. R. Co. 8 Otto, 605.
    If the English language can convey an idea clearly and unmistakably, then the words “ any insurance company, ” employed in the law of 1874, include life insurance companies as well as fire insurance companies, and authorize proceedings against either.
    The Chicago Life Insurance Company, by virtue of an amendment to its charter, adopted February 21, 1867, arid accepted by.it, is specifically made subject to all general laws regulating insurance companies thereafter to be unacted; and the law of 1869 regulating life insurance companies, and the act of 1874 regarding the dissolution of insurance companies, thereby virtually became, when enacted, a part of its charter.
   Mr. Justice Sheldon

delivered the opinion of the Court:

This was a petition filed by Thomas B. Needles, Auditor of Public Accounts of the State, in the circuit court of Cook county, at the July term, 1877, against the Chicago Life Insurance Company, under the “ Act in regard to the dissolution of insurance companies, ” approved February 17, 1874,’ praying that the company be enjoined from further proceeding with their business. Upon final hearing, at the July term, 1881, the court made a decree perpetually enjoining the company from the further prosecution of its business, and the company appealed..

The statute under which the petition was filed authorizes the proceeding whenever the Auditor shall be of opinion that the company is insolvent, or its condition such as to render its further continuance in business hazardous to the insured therein, or to the public, or where the company has failed to comply with the rules, restrictions or conditions provided by law.

The point is made that the statute under which this proceeding is had, is, as applying to this company, unconstitutional. This question of constitutionality is fully settled by the recent decision of this court in Ward, v. Farwell, 97 Ill. 593, where it .was decided that ■ this act of 1874 was constitutional, and that it was so as applied to the Eepuhlie Life Insurance Company, incorporated under a special charter granted before the passage.of the act of 1874, to-wit, March 22,- 1869, in whose charter no specific reservation of legislative control was contained. By section 5 of an act amending the charter of the present company, approved February 21, 1867, it is provided as follows: “ This act, and the act to which this is an amendment, shall not be deemed to exempt said company from the operation of such general laws as may be hereafter enacted by the General Assembly on the subject of life insurance.” Afterward, on March 29, 1867, said amendment to the charter, of which the foregoing was- a part, was formally adopted by the company. This strengthens the application of the decision in Ward v. Farwell to the present case.

There is one point of objection against the constitutionality of the statute made in this case, which it is said was not raised in the case of Ward v. Farwell, viz: that it is a special act regulating the practice in courts of justice, and providing a different method of procedure for a single class of corporate persons from that required in all other cases, and thus is im violation of section 22 of article 4 of the constitution of the. State, prohibiting the passage of special laws regulating the practice in courts of justice. This method of procedure is applicable to all insurance companies, and is not special legislation, and does not come within, such prohibition.' Various other points are made against the validity of the act of 1874, but we consider all of them to have been fully met and decided in favor of the act in Ward v. Farwell, and that it is unnecessary to notice them further.

It is contended that the proofs do not make a case, under the law.

It appears from the evidence that before the change of the corporate name of the company by the amendment to its charter of February 21, 1867, $100,000 of stock had been subscribed for, and ten per cent thereof paid in cash, that being the only payment in cash upon such stock subscriptions, with perhaps one exception; that the remainder of such subscriptions to the stock, after the change of its corporate name, was professedly paid for by the notes of the stock subscribers, payable in nearly all cases on demand, and without interest, the payment of which notes was never demanded by the company, and the notes were not secured by a deposit of real estate security and other collaterals. The company proceeded to do business with no other capital or resources. From 1871 to 1876 the company made annual sworn reports to the Auditor of the State, pursuant to the law of 1869, in all of which the capital stock of the company to the amount of $125,000, was stated to be fully paid up in cash. In 1871 the company began to declare dividends to the stockholders, which were regularly declared to 1876, the amount being $55,045, and this in violation of a by-law that all dividends should be applied in payment of capital stock subscribed, until the same should be paid; and during the time the company was not in a condition to justify the paying of any dividends. In the annual sworn statements made to the Auditor, from 1873 to 1876, there were included and scheduled as part of the assets of the company a large amount of securities for which it had never paid, and which it did not own, they amounting, in 1876, to $89,422. The receipts of the company as shown by its books, varied largely from its receipts as shown in its sworn reports to the Auditor, such discrepancy in the total receipts, from 1871 to 1876, appearing to be $95,006.46. There was the like discrepancy as to disbursements, they appearing for that same time, as reported to the Auditor, to be $22,777.50 more than they actually were. In June, 1877, the Auditor caused an examination to be made of the affairs of the company, and when the examiner was ready to trace the securities through the company’s cash book, to see whether the company actually owned the securities it claimed, the secretary of the company suddenly disappeared and absconded. It appeared that the value of the assets of the company was $196,685, the liabilities $844,857, including net present value of policies on four per cent basis, showing a deficiency of assets of $148,171.58.

It is attempted to mitigate this unfavorable showing of the financial condition of the company in various ways. As the securities before mentioned stood in the name of the company, the legal title appearing to be in the company, it is claimed that they ought to -be regarded as assets of the company. The company had paid nothing for them, and they were not actually the property of the company. It would appear that they had been so taken in the name of the company with the expectation of then- becoming its property when it might afterward be in funds and pay for them. They were not bona fide assets, and the exhibiting of them as such in the company’s reports to the Auditor was deceptive to him, to persons taking insurance, and to the public.

Evidence was introduced that the good will of the company was of the value of $100,000 or $150,000, and it is claifued that this should be counted an asset of the company. The good will of the company would be a poor species of assets to pay losses with, and it is funds which will pay losses, that an insurance company is required by law to have.

The examiner of the condition and affairs of the company, appointed by the Auditor, made report, containing among “liabilities” this item: “Net present value of policies, actuaries 4 per cent, $333,276,” and appended to the footing of liabilities was, “leaving an impairment of $148,171.58. The impairment, on the American six per cent, or commercial, basis, would be $75,205.58.” The reason or significance of this last clause appearing in the report is not apparent, but the company’s counsel takes advantage of this, and insists that the estimate should have been on the last named six per cent basis, so greatly lessening the deficiency of assets as estimated on the four per cent basis.

Section • 10 of the general act for the regulation of the business of life insurance, approved March 26, 1869, Revised Statutes 1874, p. 604, provides as follows: “When the actual funds of any life insurance company doing business in this State are not of a net value equal to the net value of its policies, according to the ‘combined experience,’ or ‘actuary’s’ rate of mortality, with interest át four per cent per annum, it shall be the duty of the Auditor to give notice to such company, and its agents, to discontinue issuing new policies within this State, until such time as its funds have become equal to its liabilities, valuing its policies as aforesaid. ”

The four per cent basis prescribed by this law must certainly govern, and the impairment of the assets of the company upon this basis, instead of on the “American six per cent, or commercial, basis, ” must be taken as showing the deficiency of assets. The legislature, in the protection of the public, might to that end well prescribe what amount of assets and degree of solvency an insurance company should possess, and on what basis it should be estimated. It would be a proper exercise of the police power. 'The validity of s,uch a provision is sufficiently vindicated by the principles laid down in the Ward case, and further remark thereon is not required. This company is subjected to the operation of this law by the acceptance of the amendment to its charter, before adverted to, made February 21, 1867.

In this connection may be noticed the point made, that this general Insurance law has prescribed what shall be the penalty for a deficiency of assets, to-wit: that the company shall discontinue issuing new policies, until such time as the funds of the company have . become equal to its liabilities, and a disregard of that provision by any officer or agent is made punishable by a fine not exceeding $1000. It is insisted that this is exclusive, and must be the only consequence of deficiency of assets. This general Insurance law was passed in 1869. It would surely be competent for a subsequent legislature, in 1874, to prescribe another and different penalty and remedy, and such proceeding as the act of 1874 authorized to be taken may be resorted to, whatever be the law of 1869. Insolvency is one of the causes named for the proceeding under the act of 1874.

It is said, on behalf of the company, that as soon as the impairment of the assets of the company was discovered, the company proposed to the Auditor to effect a re-insurance of all the outstanding risks of the company, and it is claimed that should be taken as making up any deficiency of assets. The evidence is vague as to any offer of re-insurance. It is found in the testimony of the examiner, who, after first stating as his recollection that there were two offers made to re-insure all the risks of the company in some company satisfactory to him, then proceeds: “My recollection is, that if I communicated with the Auditor with regard to re-insuring those risks, it was on a proposition made by some other company to do what we call ‘twist’ the policies,—not for the company to re-insure all of its risks at once, but to give another company the privilege of coming in and issuing new policies of its own to each individual policyholder, on such terms as they could make with the policyholders themselves, and take their pay out of such assets as they might choose of the company. I think there was a proposition of that kind made, and I think it was refused, either by myself or after communication with the Auditor. ” The real ground of complaint would seem to be that the Auditor proceeded in the precise course pointed out by the statute, and did not go outside of the line of his duty, and stop to negotiate and bargain with the company. We can not make out of this alleged offer of re-insurance anything which should be held as a defence to this proceeding, or be taken as making up the company’s deficiency of assets.

As the matured liabilities of the company, at the time of commencing the Auditor’s suit, did not exceed $8400,— which could be paid on demand,—it is contended the company was not insolvent, and. authorities are cited to the effect that when a debtor is able to meet all his engagements as they become due, in the ordinary way, he is solvent. It is a higher standard of solvency than this which our law requires of insurance companies. The general Insurance law, before referred to, directs that when the actual funds of any life insurance company are not of a net value equal to the net value of its policies, according to the mode of valuation there named, the Auditor shall notify the company to discontinue issuing new policies, until such time as its funds have become equal to its liabilities, valuing its policies as directed. This is an expression of the sense of the legislature of the degree of solvency a life insurance company should have, and it requires its assets to be equal to the amount of its liabilities, whether due or not. We think the company was insolvent, within the purview of the Insurance law.

The point finally made is, that all there was of wrong in the management and condition of the company is to be laid to the charge of the secretary of the company alone,—that all the other officers and agents of the company had acted in good faith, and were guiltless of any wrongdoing, and hence it should be taken that there was no willful default on the part of the company, and it should not be subjected to this proceeding. The company could act only through its officers and agents, and should be held responsible for the acts of, and mode of management by, its secretary, and the result therefrom. It is the management and condition of the company, rendering its continuance in business hazardous to the public, which entitles to this proceeding, without regard to what one or how many of the company’s officers participated in the mismanagement or the bringing about of such condition. The public should have the protection which the law has provided against the unsafe doing of business by insurance companies. The hazard to the public is the same whether one or more of the company’s officers were concerned in producing it, and whether or not it resulted from the willful default or misconduct of the company.

We can not say that the court below was not justified in finding from the evidence that the condition of the company was such as to render its further continuance in business hazardous to the insured therein, and to the public, and the decree will be affirmed.

Decree affirmed.