American Insurance v. Schmidt

Wright, J. i. parties: notice. Defendant, by the terms of the charter,, was a member of the corporation, and yet, in this proceed-^not must be regarded as- an. adversary party. Thus regarded, he was certainly not conclusively bound by the action of the directors. Nor .was he required to take notice of. their proceedings in relation, to his note. Defendant, then, being an adversary party, plaintiff must, show that payment of the note was legally and properly required, or .that the right to demand payment arose-under the circumstances and upon the conditions contained in the contract, the charter being taken as a-part of the contract. Defendant insists- that the need of assessments must be shown by the company, and that it is not sufficient to merely show the order or resolution for the collection of the outstanding premium notes. s. insurin ¡um note": assessment: pleading, It will .be observed that the defendant undertook to.pay in such portions, and at such time or times, as the directors should according to the charter and by-laws require. His note was a part of the capital stock, and was • A A 1 bound for the payment of losses and expenses. [504] The resolution of- the directors determined that it was thus liable, defendant was notified, failed to pay, and hence this action.- And. now, the question is, whether, by this proof, plaintiff showed a prima facie right to recover, or whether there should not have been proof aliunde that the payment, of this note, with others, was necessary to meet losses and expenses. The action of the directors was certainly not judicial in its nature, and. hence, as we have already said, was not conclusive upon defendant. Nor was defendant liable at the mere discretion of the directors. There must have been actual losses or expenses before defendant was liable, for it was for these alone that he was liable, according to the very terms of his contract. We are not to be understood as saying, that an assessment might not be made to meet future contingent expenses, but what we mean is, that the directors could not, at their mere will, make an assessment without any occasion, as contemplated by the charter and the language of the note, and thus conclude the defendant. Then again, he was only liable in proportion to the amount of his note, in common with all the other stockholders. The assessment, in other words, must have been against all alike. Is the simple resolution sufficient evidence that the condition had occurred upon which defendant was liable to pay? It seems to us,' upon principal and authority, not. . ' Defendant’s undertaking was not absolute, but condi- ' tional. Plaintiff has it in its power to show affirmatively the requisite facts. It is imposing no impossible or unreasonable burden, to require that these facts should be shown in the first instance, or that the condition upon which defendant was to be required to pay, had actually occurred. The other rule imposes the burden of showing negative]}'- that there had been no such losses and expenses, as rendered the -alleged assessment necessary. And this [505] too, by reference to records, or the presentation of facts peculiarly within the knowledge or under the control of the opposite party.' Now, we have already seen that defendant was only liable to pay his due proportion of losses and expenses. This construction as necessarily follows from the language of the contract, the nature and object of the incorporation, as though the law of the land had thus fixed the measure of his liability. This being so, the case of Thomas v. Wheeler, 31 Barb., 172, is directly in point, for it was there held that it devolved upon the plaintiff to show by competent evidence that' the contingency had occurred upon which defendant’s liability became absolute. And this view will be found sustained, more or less directly, by the following cases: Davendorf v. Beardsley, 23 Barb., 656; Hyatt v. Esmond, 37 Id., 601; Long Point Insurance Company v. Houghton, 6 Gray, 77 ; Atlantic Insurance Company v. Fitzpatrick, 2 Id., 279; Savage v. Medbury, 19 N. Y., 32; Bangs v. Duckinfield, 18 Id., 592; Shaunessy v. Rensselaer Insurance Company, 21 Barb., 605. • This conclusion accords with what we understand to be the true relations and respective rights of these parties. The amount of these pi'emium notes ought not to be called in, unless the necessity therefor legally and properly arises. The due protection of a party thus conditionally liable would seem reasonably to demand that the other party should show the necessity, not by a mere declaration or resolution, but by proof that payment was legally required. This proof is easily made. The rule is calculated to well and sufficiently protect the rights of all, while the other opens a door to possible (uot to say probable) fraud and injustice. Reversed.