Chicago Mut. Life Indem. Ass'n v. Hunt

• Decision Date: 25 January 1889
• Citation: 20 N.E. 55,127 Ill. 257
• Parties: CHICAGO MUT. LIFE INDEMNITY ASS'N v. HUNT, Attorney General.
• Court: Illinois Supreme Court

127 Ill. 257

20 N.E. 55

CHICAGO MUT. LIFE INDEMNITY ASS'N

v.HUNT, Attorney General.

Supreme Court of Illinois.

January 25, 1889.

Appeal from circuit court, Cook county; TULEY, Judge.Joseph N. Barker

and Arthur W. Windett, for appellant.

George Hunt, Atty. Gen., ( Campbell & Custer and Joseph A. Griffin, of counsel,) for appellee.

BAILEY, J.

This is a proceeding instituted by the attorney general under the twelfth section of the act of 1883, providing for the organization and management of mutual benefit societies. 1 Starr & C. St. 1348. That section provides that whenever any corporation, association, or society, organized or having transacted business under the provisions of said act, shall neglect or refuse to make its annual statements as required by the act, or whenever the auditor shall find, upon examination as provided in section 10 of the act, that any willfully false or untrue statements in any material respect have been made, or that the business of the corporation, association, or society has been conducted fraudulently, or in willful violation of any of the provisions of the act, or that the corporation has transacted business different from that authorized by its certificate of incorporation, ‘he shall communicate the fact to the attorney general, whose duty it shall be to apply to the circuit court where its principal office is located for an order requiring the officers or directors, trustees or managers, of such corporation, to show cause why they should not be removed from office or its business closed; and the court shall thereupon hear the allegations and proofs of the respective parties, and, if it shall appear to the satisfaction of the said court that any one or more of them have been guilty of fraud or any material irregularity or violation of law, to the injury of said corporation, association, or society, or of non-compliance with any of the provisions of this act, the court shall decree a removal from office of the guilty party or parties, which decree shall forever debar him or them from holding a similar office, and shall substitute a suitable person or persons to serve until the regular annual meeting, or until a successor or successors are regularly chosen or elected; or, if it shall appear to said court that the interests of its members or the general public so require, the court may decree a dissolution of such corporation, association, or society, and a distribution of its effects.’

Counsel for the association insist that the attorney general was without authority to institute the present proceeding, because, as they allege, no sufficient report was made to him by the auditor of public accounts. The contention is that such report was jurisdictional, or rather a condition precedent, and that until it was made the attorney general had no power to act. And it is further argued that, to justify the institution of proceedings, the report of the auditor should have contained, not merely the conclusions to which he arrived from an examination of the affairs of the association, but also the facts upon which those conclusions were founded. We are of the opinion that the power of the attorney general to file the information in no way depended upon the communication made to him by the auditor, but came within the purview of those powers which are inherent in his office. See Hunt v. Railway Co., 20 Bradw. 282,121 Ill. 638, 13 N. E. Rep. 176. The section of the statute under consideration conferred no new powers upon him, but vested the auditor with the supervision of associations organized under the statute, and made it the duty of the attorney general to take proper legal proceedings whenever the auditor should communicate to him the fact that an association or its officers had so conducted as to give occasion for the removal of the officers from their offices, or the closing of the business of the association.

But, even if this were otherwise, the communication by the auditor to the attorney general was sufficient to answer the requirements of the statute. The principal objection urged to it is that it stated conclusions, and not facts. In this counsel are clearly mistaken. The auditor's communication transmitted to the attorney general the report of an examination of the books, papers, and affairs of the association by an expert employed for that purpose by the auditor, and requested him to institute proceedings under the section of the statute above quoted. The examiner's report consisted in part of a detailed statement of the facts ascertained on the examination, and copies of forms and documents used by the association in the management of its business, and in part of deductions and conclusions drawn by the examiner therefrom. It is perhaps not altogether formal in its statement of conclusions, but, when considered either in relation to the facts stated or the conclusions drawn, it is clearly sufficient to show the existence of one or more of the grounds enumerated by the statute upon which it became the duty of the attorney general to institute proceedings against the association. It should be observed that no particular form is prescribed by the statute for the communication by the auditor to the attorney general. It is only provided that when the auditor, on examination, finds either that the annual statement of the association is willfully false in some material respect, or that the business of the association has been conducted fraudulently or in violation of some provision of the statute, or that the association has transacted business different from that authorized by its certificate of incorporation, ‘he shall communicate the fact’-that is, the fact of having so found-to the attorney general. The mode of making the communication is left entirely with the auditor. It doubtless may be made by communicating the finding alone, but we see no objection to the mode adopted in this case, viz., by transmitting to the attorney general the entire report of the examiner, so long as it shows one or more of the necessary findings.

It is urged that a court of chancery has no jurisdiction. This contention is based upon the theory that the proceeding is in the nature of a quo warranto to remove the officers of the association from office, and impose upon them the penalty prescribed by the statute, viz., that of debarring them from afterwards holding a similar office, or to oust the association of its corporate franchise and distribute its effects. It is said that the proceeding, so far at least as it relates to the officers of the association, is highly penal, and so not within the proper jurisdiction of a court of equity. It will be noticed that the relief provided by the statute is in the alternative, viz., the removal of the officers from office, and the appointment of others in their places, the decree to operate, as a legal consequence, to debar the persons removed from office from afterwards holding a similar office; or the dissolution of the association, and the distribution of its effects. As the court saw fit to apply the latter remedy only, we have nothing to do with the question of its jurisdiction to administer the former, and the case may be decided precisely as though the dissolution of the association and the distribution of its effects was the only mode of relief provided by the statute.

It is doubtless the rule that, in the absence of statutory provisions, courts of equity have no jurisdiction to decree the dissolution of a corporation, by forfeiture of its franchises, either at the suit of an individual or at the suit of the state. Attorney General v. Insurance Co., 2 Johns. Ch. 370;Slee v. Bloom, 5 Johns. Ch. 366;State v. Insurance Co., 8 Humph. 234;Attorney General v. Bank, 1 Hopk. Ch. 354;Doremus v. Dutch Reformed Church, 3 N. J. Eq. 332;Doyle v. Petroleum Co., 44 Barb. 239;Strong v. McCagg, 55 Wis. 624¹; 2 Mor. Priv. Corp. § 1040. But in the cases holding this rule it is uniformly admitted, whenever the question has arisen, that jurisdiction to decree the dissolution of a corporation may be conferred upon courts of equity by statute. In this state statutes have been passed vesting courts of equity with jurisdiction to decree the dissolution of corporations in a great variety of cases. Thus, by the twenty-fifth section of the statute in relation to corporations, courts of equity are given full power, on good cause shown, as a portion of the relief provided for by that section, to dissolve or close up the business of a corporation organized under that act, and to appoint a receiver of its effects. 1 Starr & C. St. 618. Similar power is given by the twenty-fifth section of the statute in relation to fire, marine, and inland navigation insurance companies. Id. 1324. Also by the act of February 17, 1884, in regard to the dissolution of insurance companies. Id. 1353. Under neither of these statutes has the power of courts of equity to decree the dissolution of corporations in proper cases been seriously questioned, but, when properly invoked, it has been uniformly exercised. Mining Co. v. Mining Co., 116 Ill. 170, 5 N. E. Rep. 370; Association v. Fassett, 102 Ill. 315. Such power was directly affirmed by this court, after full and elaborate consideration, in Ward v. Farwell, 97 Ill. 593, and Insurance Co. v. Auditor, 101 Ill. 82, and the question, therefore, is no longer an open one. The point made by counsel that, by transferring jurisdiction of suits to dissolve corporations from courts of law to courts of equity, the corporations affected are deprived of the right of a trial by jury guarantied by the constitution, is fully and satisfactorily answered by the opinion of the court in Ward v. Farwell, supra, and the argument there made need not be repeated here.

Nor is the position well taken that the present suit is in the nature of a criminal prosecution, and therefore required by section 33, art. 6, of the constitution, to be carried on ‘in the name...