[Vol. 125.

Fourth Department, March, 1908. ested has been duly notified at the outset and neglects to appear he cannot be expected to receive further notice unless some statute requires it. It would not be feasible in making assessments of this kind against a large number of policyholders, widely scattered, to notify each policyholder personally, and notice by mail is all that need be required. (Stevens v. Hein, 37 App. Div. 542.)

There was also a by-law of the company in force since October, 1902, reading as follows: "Whenever the company is not possessed of cash funds above its reinsurance reserve sufficient for the payment of incurred losses and expenses, the directors shall make an assessment for the amount needed to pay such losses and expenses upon the members liable to assessment therefor in proportion to their several liabilities, provided the assessment or assessments upon any member shall not exceed the amount of the policy liability of such member, which shall be a sum equal to, but in no event shall the total assessment or assessments exceed the cash premium charged upon each policy."

The object of this by-law was to vest the authority in the directors, without any notice whatever, to impose these assessments. Had there been no receivership the directors, by virtue of this by-law, without any application to the court, would have been authorized to make any assessment upon the members needed to pay losses and expenses within the "cash premium charged upon each policy."

It is claimed that common-law proof was essential to enable the plaintiff to establish his cause of action against the defendant, and that the exemplified record of the proceedings in the Massachusetts court was no evidence of the necessity or validity of the assessment levied. The rights and liability of the members of the Atlas Association were primarily fixed by contract. Each member agreed to pay whatever sum or sums might be assessed by the company, not in excess of the cash premium. These assessments were to be made in pursuance of the laws of the State of Massachusetts so that the statutes regulating these assessments became a part of the contract. The statute provided a method of procedure, where application to the court was necessary, which has been followed in this case. An action was commenced charging that the company was insolvent and a receiver was appointed by the decree or judg

App. Div.]

Fourth Department, March, 1908. ment of the court. The receiver applied upon petition setting forth the necessity for the levy of assessments to pay existing losses, and after a hearing the necessity was judicially determined, and the directors, carrying out the orders of the court, made the assessments. The defendant had notice by mail of the initiation of the proceeding by the receiver and of the hearing before the auditor. As already suggested, it would be impracticable to serve personally on all the policyholders who were in many States, and except for the fact that service by mail is required by the Massachusetts statute no service at all would seem to be necessary on the individual members of the association. (Hawkins v. Glenn, 131 U. S. 319, 329; Glenn v. Liggett, 135 id. 533, 543 et seq.)

The corporation is the party and the members have entered into an agreement to be bound by the action of the directors in the matter of levying assessments when they act conformably to the laws of the State of Massachusetts. Passing that, however, when the defendant was advised that the receiver intended to apply to the court for leave to levy assessments upon the members of the association and was further notified that a hearing upon this application was to be had before the auditor appointed by the court, it was his privilege to appear and resist the application and present proof showing no necessity existed for the levy. He could not keep silent and then assail the proceeding when the levy is made upon him simply by charging that no process of the court was served upon him. Notice by the receiver and subsequently by the auditor should have attracted his attention.

Nor do I think common-law evidence was essential in this case. I am aware that in Converse v. Stewart (105 App. Div. 478) the court held otherwise. In that case the defendant had no notice whatever of the assessment imposed, and the facts are entirely different from those found in the case we are reviewing.

In Howarth v. Angle (162 N. Y. 179) there is a statement that the defendant may controvert the validity of the assessment, but in that case common law evidence was received.

The proceedings in the present case were the result of an agreement to which the defendant subscribed, whereby he agreed to pay "all such sums as may be assessed by the directors of said company, pursuant to the laws of the Commonwealth of Massachusetts,"

[Vol. 125.

Fourth Department, March, 1908. up to the amount of his cash premium. The assessments in question were assessed by the directors. True, the assessments were made in obedience to a decree of the court. The decree was based upon the auditor's report, which the court deemed sufficient warrant for its judgment. The court, without remitting the matter to the directors, might have acted in their stead. In appointing the receiver the court assumed control of the affairs of the insolvent corporation and exercised the functions of the directors. (Great Western Tel. Co. v. Purdy, 162 U. S. 329, 336.)

In that case it was held the effect of an assessment, whether made by the directors or the court, was "conclusive evidence of the necessity for making such an assessment, and to that extent bound every stockholder without personal notice to him." The decree there did not purport to be a judgment against any individual stockholder, and, consequently, the defendant, a stockholder, might interpose any defense peculiar to him, and the Statute of Limitations was held good on his plea. Comity between the States requires that the decree or judgment of the State of Massachusetts be given due effect. (Howarth v. Angle, 162 N. Y. 179; affg., 39 App. Div. 151.)

That is a constitutional mandate (U. S. Const. art. 4, § 1); and Congress in the exercise of the authority bestowed upon it by that section has enacted that "the said records and judicial proceedings, so authenticated, shall have such faith and credit given to them in every court within the United States, as they have by law or usage in the courts of the State from which they are taken.” (U. S. R. S. § 905, revising 1 U. S. Stat. at Large, 122, chap. 11, Act of May 26, 1790.)

After all, whether the decree has all the verity of a judgment is not of the utmost importance. The defendant by his contract agreed to be subjected to the maximum liability of his premium for losses incurred in compliance with the laws of the State where the company was organized. The mode of procedure prescribed by those laws has been observed, and the assessments levied upon the defendant, with other stockholders, to pay the obligations of the company. The receiver is simply endeavoring to enforce an assessment which the defendant voluntarily assumed as a condition of the issuance of the policy to him.

App. Div.]

Fourth Department, March, 1908.

It is also urged that there is no justification for so large an assessment, as the indebtedness of the company was not shown to equal the amount assessed. The proofs are not before us. There were many policyholders in different States and the levy was made upon all. Some would be irresponsible; the expense of enforcing payment would probably be heavy and all these matters we may assume were considered in making the assessment at the amount stated. The full sum ordered would not be realized for the payment of the debts of the company. If each policyholder is to be permitted to impeach the amount of the levy made it would cease to be ratable and the adjudications would vary in the several actions.

The one purpose of the whole proceeding was to ascertain and determine as to the necessity of an assessment. The court passed upon that proposition and its adjudication is conclusive. It is also prima facie evidence at least of the amount of the assessment to be levied. The record denotes that it was ratably levied upon the stockholders and the sums chargeable against the defendant are contained in the decree. We are not obliged to go beyond these holdings in order to sustain the judgment. The defendant did not seek to offer any evidence impugning the validity of the assessment, but he contented himself with relying upon the alleged weakness of the plaintiff's case except as to an affirmative defense to which I will advert later.

It is also to be observed that it is stipulated in the record that evidence was given to support certain findings which are enumerated. The evidence is not in the record, so whether it was by the testimony of witnesses or by stipulation of the parties, we are not advised. In the findings, not included in this specific admission, the exemplified record sustains them, and for aught we know they may rest upon abundant other evidence. We are not to assume the contrary.

The policy contained a clause that it should be canceled at any time at the request of the assured, and if canceled, "the premium having been actually paid, the unearned portion shall be returned " to him. After the adjudication of insolvency and the appointment of the plaintiff as receiver the defendant attempted to avail himself of this privilege. He had not paid the premium, but subsequently the court permitted the receiver to settle with him by APP. DIV. VOL. CXXV.

2

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Fourth Department, March, 1908. paying the earned premium to the date of the judgment of insolvency which the defendant paid. The judgment explicitly provided that the compromise should not include "any claim for any possible future assessment." The defendant had no notice of the entry of this decree, but the settlement did not purport to relieve him from liability to contribute toward the payment of losses according to the stipulations of his policy. The right to cancel in any event could not be available to the assured after the association had become insolvent; if so, every policyholder might cause his policy to be canceled and leave the creditors unpaid.

Again, he claims, if liable at all, the assessment must be imposed upon the sum actually paid by him, instead of the cash premium provided for in the policy. The amount is fixed by the contract, and the settlement of the other controversy does not assume to modify the provision.

The judgment should be affirmed, with costs.

All concurred.

Judgment affirmed, with costs.

MAY RAYNOLDS, an Infant, by RAYMOND RAYNOLDS, Her Guardian ad Litem, Respondent, v. ANNA VINIER, Appellant.