the contract. They received the plaintiff's money in consideration that they would form a company and give him stock therein to the amount of $10,000.00, and they did nothing of the kind. They certainly cannot keep the plaintiff's money in these circumstances. Their want of success in the formation of the company is no concern of the plaintiff, and it is no defense in this action.'"

The court then quotes sec. 162 from Alger on the Law of Promoters, as being in point, which reads thus:

"When a subscriber for shares in a projected corporation has paid money thereon in advance to the promoters and the scheme proves abortive, he may recover back his money. This right rests on the failure of the consideration on which the money was paid. But the scheme is not to be deemed abortive until the formation of the corporation has been abandoned, or has become impracticable, or a reasonable time for the formation has elapsed. It is reasonable, in the absence of an agreement to the contrary, that the expense of exploiting the proposed undertaking should, in case it collapses, fall upon the original promoters, and not on those who advanced their money on the faith of the ability of the projectors to do that which they undertake to do."

In commenting upon the authorities this is said:

"We think the principle announced in the above authorities apply with especial force to the facts of this case, and that the defendants, as original directors, occupying a position kindred to that of promoters, would be liable to the plaintiff for the return of his subscriptions, even though they have been guilty of neither fraud nor conspiracy. There was sufficient evidence of breach of trust and failure of duty to require the question of their liability to be submitted to the jury."

Under the statute defendants in error were charged with the specific and express duty of securing subscriptions to the entire capital stock of the company, and of depositing with the Insurance Commissioner $100,000.00, either in cash or approved securities, as a guarantee fund

against company liabilities. That they resigned as directors could in no way alter or affect their duties or liabilities under the statute. They could not avoid these by resigning from the directorate of the company, nor could they, or any of them, be released except upon performance, or by consent of all the beneficiaries, or through appropriate proceedings in a court of equity. Beech on Trustees, sec. 488-489; Dilliard v. Winn, 60 Ala. 285; Ross v. Barclay, 18 Pa. St. 179, 65 Am. Dec. 616. It is no defense that defendants, or some of them, were not acting as directors when plaintiff purchased his stock, or that they, as individuals, never received the money. Neither can they claim that they did not know or understand that they had been appointed as commissioners, with duties and liabilities such as are now claimed were imposed by the statute. As incorporators of the company they were bound to know the law, and their duty under it. It is not necessary, however, to resort to this principle to charge them with liability, as the record affirmatively shows that they fully understood what their duties were, and the effect of the statute. They adopted advertising matter in the nature of letters, to persuade prospective purchasers that their interests would be faithfully protected, and their money applied accordingly to law, in which is set forth the purpose and intent of the statute as they construed it. These matters establish actual knowledge and complete comprehension on the part of the defendants of the entire situation. A part of one letter so used is as follows:

"In regard to the questions asked in your letter we wish to say that the company was incorporated May 13th, and the amount of business on the books is, of course, nothing at this time, the law requiring that no business can be written until our capital stock is fully paid up and deposited with the State. The stock which has been sold up to date aggregates a little more than $200,000.00 and the amount paid in is small, owing to the fact that the amount subscribed is to be paid on the monthly payment plan.

"You ask in regard to the amount of stock now for sale,

and the treasury stock reserved, and the amount of stock given to original incorporators, officers, etc. In reply to this, would say that an Insurance Corporation is very unlike most any other corporation; the capital cannot be used for development purposes. No promotion or treasury stock can be held out. The ENTIRE capital stock must be paid for and invested in securities, prescribed by the statutes, and remain in the custody of the State, unimpaired. The statutes of this State require that the Superintendent of Insurance make an examination annually with an appraisement and valuation of the assets and liabilities of each Legal Reserve Life Insurance Company organized and operating under its laws. As a result, no such organization has failed since the creation (in 1873) of the legal reserve requirements."

A portion of another letter sent out by the vice-president and general manager reads as follows:

66 * * * We have no hesitancy in asking you to put a small amount of money in stock of this character, for as far as the possibilities of loss are concerned, I would say they are eliminated entirely. After the company is formed the entire capital stock must be held by the State of Colorado in securities satisfactory to the Commissioner of Insurance, and until the entire capital is paid in, the money collected is held intact by the Central Savings Bank & Trust Company and will draw 3% interest while deposited and should such a thing occur that the Company would not be formed, the money you have paid will all be returned. If you wish more evidence along this line that what I say is true, you may make further inquiries by writing the Central National or Saving Bank as above referred to."

When these, and similar, communications were sent to prospective investors, none of the defendants had resigned as directors of the company. The written authority from the Commissioner of Insurance was accepted by the defendants, and they embodied an interpretation of the statute in their advertising literature, and set in motion.

machinery for extracting money from the public. In law they must be held to have undertaken the trust, charged with full knowledge of their duties and responsibilities thereunder, and it is too late now to change or modify the situation. Once having put their hands to the plow, the defendants may not voluntarily turn back, or abandon the enterprise, and thus escape liability.

Some of the defendants contend that they cannot be held because the company as such, and not the commissioners, received stock subscriptions, dissipated the funds, and did the other acts of which complaint is made. The records of the company show that the defendants were present when action was originally taken relative to stock subscriptions, and as to other matters concerning which they were empowered to act, as commissioners under the statute. At one directors' meeting one of the defendants was elected president, one vice-president and general manager, one secretary and treasurer, one chief medical director and one . general counsel. They were present at other meetings where money was paid out, salaries fixed, stock salesmen engaged, and stock selling arrangements perfected. It is contended that these, and similar acts, show, or tend to show, that the company and not the statutory commissioners took charge of the stock subscriptions, collected the money, and spent it in violation of the statute, but to us they appear conclusive of the fact that the defendants were cognizant of every act done, and that all that was done was with their advice, approval and assistance, and that but for their participation and sanction nothing whatever could have been done. Extracts from the company minute book show that the defendants merely employed the company as a convenient instrument with which to carry out their plan of organizing and perfecting it. That this is an effective way to complete such an organization is apparent; and had the defendants been mindful of their statutory duty, this method of performing it might well have been the best that could have been adopted. In law, however, the company was merely the agent of the commissioners;

its acts, its knowledge, its contracts and the funds arising therefrom, were all theirs, and they are liable in law for the result of such agency. Indeed, under the facts of this case, the defendants ought not to be heard to question or deny liability. They were charged with the duty of collecting and conserving the fund in question, and if they permitted another to usurp their functions, and collect and dissipate such fund, they are as clearly liable as though they did the thing themselves.

It is urged also that the complaint is defective in that the United States Postal Insurance Company is not joined as defendant. The company had, and has, no legal existence as an insurance company, and as we are now advised, is entitled to no consideration from any standpoint. It has no legal rights and no legal status, and is not asking to be made a party. The question here involved is one solely between purchasers of stock and these defendants. The attempt seems to be to use the projected company as a shield to aid defendants in escaping personal liability, and this should not be countenanced.

The record plainly discloses that the defendants were responsible for everything done in connection with the attempt to perfect the organization of the proposed insurance company, and while actual fraud is not charged or proven, it does appear that they were grossly negligent and utterly regardless of, and totally indifferent to, their duties and responsibilities under the law, as commissioners, and this of itself, without more, is sufficient to fix liability.

The intent of the statute is so clear that there is no room for a reasonable difference of opinion about it. It was intended thereby to guard against and make impossible the very thing which happened to this company. If those who were designated under the statute to administer its affairs, during the formative period, had properly performed their duties and functions, the calamity which overtook the company through a dissipation of its assets, could never have come upon it.