Chase v. Lord.

condition of granting the franchise; that the amount to which it refers is only such portion of the nominal capital as was raised for that purpose, and that the liability does not apply to stockholders, but only to parties actually engaged or otherwise interested in getting up the company, for liabilities incurred prior to incorporation, and terminates with the acquisition of the corporate franchise.

At the trial, the judge directed a verdict for the plaintiffs, and the defendants appealed.

The supreme court, at general term, affirmed the judgment below, being of opinion that the statute should be construed upon the view that the policy of the law required that the company should become possessed of all the capital announced by its charter (Reported in 16 Hun, 369).

From this judgment the plaintiff again appealed to this court. The other material facts sufficiently appear in the following opinions.

D. D. Lord, for defendants, appellants.

W. C. Whitney, for plaintiff, respondent.

DANFORTH, J.-In October, 1856, the Columbian Insurance Company was organized under the act of 1849, chapter 308, providing for the incorporation of insurance companies. On February 1, 1865, the plaintiff procured a policy of insurance from that company upon the ship "Eagle Wing," which was soon after lost, and thereby, as is conceded, a claim arose in his favor against the company. In January, 1866, the company was dissolved, and its affairs placed in the hands of a receiver, by whom the plaintiff was paid a portion of his claim. The defendants' testator was a stockholder in the company during all the times above stated, and he dying, this action is brought against the defendants, as his executors, the plaintiff claiming that the testator became personally liable to pay the

Chase v. Lord.

loss, by reason of non-compliance by the company with the conditions of the act.

It is contended by the appellant-first, that the testator was never liable; and second, if he was liable, the cause of action did not survive against his estate. With the second proposition we have no difficulty. The defendants took the stock, subject to any liability which existed on account of it (Bailey v. Hollister, 26 N. Y. 112-116); and if the testator was liable to pay the plaintiff's demand, the defendants, as his representatives, are equally so. The plaintiff contends that the liability in question was incurred by the testator, because the provisions of section 19 of the statute above named were not complied with. [The learned judge here quoted the section, see p. 261 above.] The question is not free from difficulty; and this difficulty arises from the vague manner in which the legislature has sought to express its meaning. The statute has been before the courts in several cases (Mygatt v. New York Protection Insurance Co., 21 N. Y. 61; White v. Haight, 16 Id. 317; People ex rel. Barton v. Rens. Insurance Co., 38 Barb. 323; Cooper v. Staver, 41 Id. 151; Thomas v. Achilles, 16 Id. 491); and in Hart v. Achilles, 28 Id. 582, Judge MARVIN speaks of it as "extremely obscure, faulty and imperfect," and in Thomas v. Achilles (16 Barb. 495), as "ambiguous and imperfect," but the present, so far as we can discover, is the first case in which a judicial decision has been sought, as to the construction of the section above cited, and we are therefore unaided by any authority.

In the first place, it is clear that there was no common law liability on the part of the testator, and the legal presumption is, that all statutory conditions have been complied with. This presumption continues until the contrary is shown. No duty rested upon the stockholder to do this, and it is incumbent on the

Chase v. Lord.

plaintiff to establish a non-compliance with the provisions of the statute, before he can charge the defendant (Bruce v. Driggs, 25 How. Pr. 71).

At this point it is not necessary to consider whether the requisite amount of capital was paid in, because, if it had been, and the proper certificate was not recorded, the liability would attach (Aspinwall v. Sacchi, 57 N. Y. 335). We should naturally expect to find in the section itself, words to satisfy the reference to the certificate, for we are referred to some antecedent provision by the words "as hereinbefore provided." There is, however, nothing in the section itself to give information as to the character, form or contents of the certificate, or to indicate by whom it shall be made. We must look elsewhere in the statute for the antecedent. By the 7th section, provision is made for certificates to be furnished by the comptroller, under certain circumstances, to companies organized in other States or in foreign countries. Section 8 prohibits a company organized under the act from holding real estate beyond a certain period, "unless it shall procure a certificate from the comptroller," as therein provided. Neither of the certificates required by these sections can in any manner affect the question before us; those of the 7th section do not relate to domestic corporations, and that of the 8th section relates to a matter having no connection with the case in hand.

By the 3d section, the associates (who are also styled corporators) who have undertaken to form a company under the act, are required to file, in the office of the secretary of state, a declaration signed by them, which, among other things, shall comprise a copy of the charter proposed to be adopted by them; and by section 10 it is made their duty to declare in this charter the mode and manner in which the corporate powers given by the act are to be exercised, "together

Chase v. Lord.

with the amount of capital to be employed in the transaction of its business ;" and by section 11 it is made the duty of the attorney-general to examine this charter, and if it is found to be in accordance with the act, and not inconsistent with the constitution or laws of the State, to certify the same to the comptroller, and the comptroller shall thereupon cause an examination to be made, either by himself or by three disinterested persons appointed by him for that purpose, who shall certify under oath, that an amount equal to, at least, the amount specified in the 5th section of the act, if it be a stock company, has been paid in and is possessed by it in money or certain stocks, &c. ; or if a mutual company, that it has received and is in the actual possession of the capital premiums or engagements of insurance, as the case may be, to the full extent required by the 5th section of the act; or if it be a life and health insurance company, to the full amount, and invested in the same manner as required by the 6th section of the act. Copies of these certificates are to be filed in the office of the secretary of state, and it is made his duty to furnish the corporation with the certified copy of the charter and certificates, which, upon being filed by them in the office of the clerk of the county in which their company is to be located, shall be their authority to commence business and issue policies. There are no other provisions for a certificate of any kind, and it seems to us that the certificate referred to in section 19 is that which we find in section 11, and which is above set forth.

First, it is antecedent to the provision of the 19th section; Second, it is the only one of all contained in the act which bears a sensible relation to its demand; Third, it enables us to give the act a reasonable and not strained construction. This we are bound to do; for so far as it subjects the stockholder to any responsibility for the corporate debts, it is manifestly

Chase v. Lord.

in derogation of the common law (1 Pars. on Cont. 143; Stedman v. Eveleth, 6 Metc. 114); and we are not at liberty to extend its effect beyond its literal terms, by enlarging or aggravating the liability of the stockholder. Says Chief Justice SHAW, in Gray v. Coffin (9 Cush. 199), in considering a claim not unlike that before us: "To create any individual liability of members for the debt of a corporation, a body politic, created by law, and regarded as a legal being, distinct from that of all the members composing it, and capable of contracting and being contracted with as a person, is a wide departure from established rules of law, founded in considerations of public policy, and depending solely upon provisions of positive law. It is, therefore, to be construed strictly and not extended beyond the limits to which it is plainly carried by such provisions of statute." So construed, the act is coherent.

Section 1 permits a certain number of persons to associate and form an incorporated company, either, first, to take marine risks; or secondly, for fire insurance; or thirdly, on health or life. Such persons are styled corporators. Section 3 requires them to file the declaration and charter in the office of the secretary of state. By section 4 they may then take subscriptions to the stock, or, in case of mutual insurance receive propositions, for insurance as stated in section 5.

Section 5 then provides that no joint stock company shall be organized in the city of New York with a capital less than $150,000; or, in case of mutual insurance, until agreements have been entered into for insurance with at least one hundred applicants, the premiums on which, if it be marine, shall amount to $300,000, or if fire insurance, to $200,000, and notes have been received in advance for the premiums on such risks. By section 6 no life or health insurance