McDonnell v. Alabama Gold Life Ins. Co.

• Decision Date: 05 December 1888
• Citation: 5 So. 120,85 Ala. 401
• Parties: MCDONNELL ET AL. v. ALABAMA GOLD LIFE INS. CO. ET AL.
• Court: Alabama Supreme Court

5 So. 120

85 Ala. 401

MCDONNELL ET AL. v. ALABAMA GOLD LIFE INS. CO. ET AL.

Supreme Court of Alabama

December 5, 1888

Appeal from chancery court, Mobile county; THOMAS W. COLEMAN, Judge.

Bill filed by Kate McDonnell and others against the defendant company and certain of its stockholders to enforce the individual liability of the latter. A demurrer to the bill was sustained in part, and complainants appeal.

J Little Smith, for appellants.

Overall & Bestor, for appellees.

SOMERVILLE J.

The bill is filed by certain policy-holders against the defendant corporation, which is an insolvent life insurance company and against co-defendant stockholders owning shares in the company, on October 8, 1886, the date of its dissolution, as manifested by the making, on that day, of a general assignment for the benefit of creditors. The complainants claim to be creditors of the company in præsenti, and seek to subject the stockholders to a personal liability in sums respectively equal to the amount of their stock, and additional to such stock, under the provisions of the constitution and laws of Alabama, which were of force at the time the company was organized, in the year 1868. It is claimed that this personal or individual liability arises severally under the constitution of 1868 and under the Code of 1867. The provisions of that constitution relied on as applicable are sections 2 and 3 of article 13, which read as follows: "Sec. 2. Dues from corporations shall be secured by such individual liabilities of the corporators or other means as may be prescribed by law. Sec. 3. Each stockholder in any corporation shall be liable to the amount of his stock held or owned by him." Section 1760 of the Revised Code of 1867, identical in language with section 1478 of the Code of 1852, is in the following words: Section 1760. "The stockholders of any such corporation are liable for all debts due by it at the time of its dissolution, to the extent of their stock." This section is made applicable to life insurance companies, by the act approved August 6, 1868, (Acts 1868, p. 16,) which purports to amend section 1755 of the Code of 1867, provided such amendatory act be sustained as constitutional. The errors and cross-errors assigned are based on the rulings of the chancellor on the demurrers to the bill, all of which were overruled except those making objection to the paid-up policy of Mrs. McDonnell as one not imposing any personal liability on the stockholders. This paid-up policy was issued after December 5, 1875, when the present constitution went into effect, with its accompanying provision that "in no case shall any stockholder be individually liable otherwise than for the unpaid stock owned by him or her." Const. 1875, art. 14, § 8; Code 1876, § 2023. Her original policy was, however, issued on February 23, 1870, while the constitution of 1868 and section 1760 of the Code of 1867 were in force. We proceed to consider seriatim the various objections to the equity of the bill as suggested in the demurrers and presented on argument.

1. It is first urged by counsel that neither the phrase "shall be liable to the amount of stock held or owned by him," as used in the constitution of 1868, nor that used in the Code of 1867, (section 1760,) liable "to the extent of their stock," can be properly construed to mean liable for such amount additional to, or over and above, their stock; but that these phrases mean nothing more than that stockholders of corporations shall be personally liable to creditors for unpaid subscriptions of stock. It is enough to say that this contention is settled against the cross-appellants by the past decisions of this court, which hold that these laws were intentionally framed for the express purpose of imposing a personal or individual liability on corporate stockholders, not only to the extent of their unpaid stock, but for an additional sum equal to the amount of such stock, enforceable by a bill in equity for the equal benefit of the creditors on the dissolution of the corporation. Smith v. Huckabee, 53 Ala. 191; Spence v. Shapard, 57 Ala. 598; Association v. Insurance. Co., 70 Ala. 120. Laws having in view a like purpose, of securing the public against extravagant speculations and incautious enterprises on the part of bodies corporate, have long prevailed in this state, and in many other states of the union. The language of these foreign statutes is, in many cases, quite similar to our own, and a like construction has been placed upon them by the highest courts of the several states enacting them. Briggs v. Penniman, 8 Cow. 387; Hawthorne v. Calef, 2 Wall. 10; Cook, Stocks, § 215, note 2; Terry v. Tubman, 92 U.S. 156.

2. It is expressly provided in some of these statutes that the personal liabilities of stockholders for this additional amount shall arise only after a recovery by the creditor of a judgment against the corporation, and an exhaustion of his legal remedy by a return of no property found. The remedy, in other words, is there conferred only on judgment creditors after exhausting the corporate assets. It is manifest that under neither the provisions of the constitution nor those of the statute under consideration, is any such limitation established; and, not being so restricted, the remedy must be construed as being conferred on all creditors, including those who have no lien, or whose claims are evidenced by simple contract. The assignment of demurrer based on this ground was properly overruled. Spence v. Shapard, 57 Ala. 598; Association v. Insurance Co., 70 Ala. 120.

3. It is further contended that the claims of policy-holders in life, like those of the complainants, do not come within the class of demands intended to be secured by this additional liability; that they are not "dues" from the corporation, within the meaning of the constitution of 1868, nor "debts due" by it, within the intention of the statute, and that for this reason the bill is wanting in equity. Laws of this peculiar kind have been held by some courts to be remedial, and therefore to be liberally construed. By others they have been construed strictly as in derogation of the common law. The true principle sustained by the sounder reason, in our judgment, is that they should be construed neither liberally nor strictly, but reasonably, so as to carry out the clear purpose and policy for which they are enacted. Thomp. Liab. Stockh. § 53; Freeland v. McCullough, 43 Amer. Dec. note, pp. 696, 697. It is accordingly the opinion of the court that the claims of the complainants, growing out of the insolvency of the defendant, and the repudiation of its duty to carry the policies by a discontinuance of its business, are debts due in præsenti, upon the dissolution of the corporation, and, as such, fall within the intention of the law. There is in this case a manifest and total breach of contract by the company in its failure to carry on the business of life insurance. This breach has resulted in damage to all persons holding policies for which an immediate action will lie. These damages, moreover, are liquidated, being capable of the most accurate and certain mathematical ascertainment. The legal measure of such damages is the surrender or equitable value of the policy, calculated on the basis of the "American Tables of Mortality," which are now the orthodox standard throughout the United States and Canada, and of which judicial notice will be taken by the courts. The data of age, premiums paid, and the date of the policy being given, this value becomes certain and fixed, and, we repeat, the policy-holder becomes a creditor of the company with the right to sue for such value instanter upon its dissolution. People v. Insurance Co., 78 N.Y. 114; Insurance Co. v. Statham, 93 U.S. 24; McCall v. Insurance Co., 9 W.Va. 237; Day v. Insurance Co., 45 Conn. 480; Gordon v. Tweedy, 74 Ala. 232. And the claim is none the less a "debt due," within the purpose and intent of the law, because it was, at the time the policy was taken out, payable on a future contingency. It was nevertheless debitum in præsenti, solvendum in futuro; having in its composition no element of tort. U. S. v. Bank, 6 Pet. 36; Fearn v. Ward, 65 Ala. 33; Cable v. McCune, 26 Mo. 371; Carver v. Manufacturing Co., 2 Story, 432.

4. The pivotal period fixed by the statute for the accrual of this personal liability is for those debts due at the time of the dissolution of the corporation. Code 1867, § 1760. That the defendant corporation was dissolved, within the meaning of this statute, by the assignment made by it for the benefit of creditors in October, 1886, and by its entire cessation of business, there can be no doubt. A practical and not a judicially adjudged dissolution is what the statute contemplates. This is evidenced by insolvency, and the turning of the corporate assets over to a trustee for distribution among creditors, followed by a complete abandonment of the business for which the company was organized. The authorities, both in this and other states, are so full on this point as to render any lengthy discussion of its unnecessary. Associationv.Insurance Co., 70 Ala. 120; Sleev.Bloom, 19 Johns. 456; Briggsv.Penniman, 8 Cow. 387; Thomp. Liab. Stockh. § 267.

5. The claims in suit not having become due until the dissolution of the corporation on October 8, 1886, no right of action accrued thereon until that day against the stockholders of the company. The bill having been filed October 15, 1886, only seven days thereafter, it is palpable that the suit is unaffected by the statute of limitations, either of six years or of any other period.

6. It is suggested that the defendant corporation, the Alabama Gold Life Insurance Company, was never legally organized, there being...