Falkenbach v. Patterson

• Decision Date: 16 June 1885
• Citation: 43 Ohio St. 359,1 N.E. 757
• Parties: FALKENBACH v. PATTERSON, Receiver. SELTZER v. PATTERSON, Receiver.
• Court: Ohio Supreme Court

43 Ohio St. 359

1 N.E. 757

FALKENBACH

v.PATTERSON, Receiver.

SELTZER

v.PATTERSON, Receiver.

Supreme Court of Ohio.

Filed June 16, 1885.

Error to the district court, Franklin county.

These cases are alike in legal principles. In March of the year 1877, William M. Patterson, as receiver of the Ohio Life Insurance Company, commenced his actions in the court of common pleas of Franklin county: one against Joseph Falkenbach, and William D. Hill, superintendent of life insurance for the state of Ohio, and others, the object and purpose of which was the foreclosure of a mortgage claimed to have been executed by Joseph Falkenbach to the company, to secure the payment of the note of Falkenbach, described in the petition; and the other against Van S. Seltzer, said superintendent, and others, seeking the foreclosure of a mortgage of Seltzer, to secure the payment of his note described in the petition. The petitions aver the creation and organization of the Ohio Life Insurance Company as a corporation under the laws of the state of Ohio, to do a business of life insurance, about January, 1874; that such company or corporation ceased such business in January, 1875, for the reason of its insolvency and inability to conduct the same; that about May 25, 1876, proceedings were instituted by the directors of such corporation, in the court of common pleas of Cuyahoga county, to dissolve the corporation and settle up its liabilities, which resulted in the appointment of Patterson, receiver of the assets of said company, with authority to collect the same, and to apply their proceeds to the payment of the liabilities of the company; that said corporation, at the time of said dissolution, was not possessed of any assets at its place of business, or elsewhere, except such as are hereinafter stated; that in pursuance of the laws under which said company was organized, and before it did, or was authorized to, commence the business of life insurance, it deposited with the state superintendent of insurance, at Columbus, Ohio, notes secured by mortgages upon real estate, amounting upon their face to $100,000; that the several notes so deposited were each payable five years from date, with interest at the rate of 8 per cent. per annum, payable annually; that the indebtedness of said company, as found by said court, for losses under policies issued before its dissolution, and other liabilities, amounted to $40,000, or more, and that said company has no assets with which to pay any part thereof, except the securities aforesaid, and that among the notes so deposited were included the note and mortgage of Joseph Falkenbach, and the note and mortgage of Van S. Seltzer; that said notes and mortgages were assigned to W. D. Hill, superintendent of insurance, in trust for the benefit of said company and its creditors, to be held for that purpose, and were so held by that officer for that purpose, and no other, under the laws of the state in that behalf. The petitions further aver the amount claimed to be due from Falkenbach and Seltzer. Demurrers to the petitions were overruled.

The defendants below,-that is, Joseph Falkenbach, in the action against him, and Van S. Seltzer, in the action against him,-by their amended answers, deny substantially the averments of the petition, except the execution of the notes and mortgages, and deny that any sum whatever was due to the plaintiff, as such receiver, from Falkenbach and Seltzer on said notes and mortgages, and aver that such pretended creation and organization of such company or corporation was in fraud of the laws of the state. The second defense of these answers set forth that these notes and mortgages were wholly without consideration as to Falkenbach and Seltzer, and that any pretended consideration upon which the same were signed and executed by them had wholly failed. The third defense of the answers shows that Falkenbach and Seltzer were severally induced to make said notes and mortgages by the false and fraudulent representations of one Charles J. Hess, professedly acting for and under the authority of said pretended company. The replies deny all and singular the allegations of such answers.

The judgments of the court of common pleas in the actions were in favor of Falkenbach and Seltzer, and Patterson, as such receiver, took his appeal to the district court. The district court in each of the cases found generally for the plaintiff, and upon request of the plaintiffs in error found the facts and conclusions of law separately, as follows: (1) That the defendants, Joseph Falkenbach and Van S. Seltzer, made and delivered to the Ohio Life Insurance Company the notes and mortgages described in the petition. (2) That they were, by the president and secretary of said insurance company, indorsed and delivered to the superintendent of insurance, as stated in the petition. (3) That they were by said superintendent deposited with the state treasurer on or before January 20, 1874, and have since remained so deposited. (6) That the several acts and proceedings required by law to be done and performed by the corporators prior to commencing business, were by said corporators so done and performed; and that said corporation was regularly organized in due form of law, and deposited with the superintendent of insurance the securities required by law before said superintendent issued to said corporation his certificate of organization and authority to commence business. (7) That the amount evidenced by the notes and mortgages deposited with and transfered to the state superintendent, as certified to by him, was $100,000, which amount included the notes and mortgages of said defendants, Joseph Falkenbach and Van S. Seltzer. (8) That Charles J. Hess was in some way an officer or agent of the corporators or company, and was engaged in procuring subscribers to the stock, and notes and mortgages to be deposited with the superintendent to complete the organization for business. (9) That said company became insolvent; that its officers, on June 1, 1876, applied to the court of common pleas of Cuyahoga county, under the act of April 15, 1867, for a dissolution of said company, and the appointment of a receiver to settle up its affairs pursuant to said act of April 15, 1867; that the superintendent of insurance was a party to said proceedings. (10) That in and by said court, and in said proceedings, the plaintiff was appointed receiver, said superintendent not objecting thereto, with full authority, so far as the court could confer the same, to collect the assets and pay the liabilities of the company, among which assets was included the note and mortgage of defendant. (11) That the plaintiff gave bond and was qualified to act as such receiver, and has so remained ever since. (12) That a large number of policies were issued by said company while it did business, and were outstanding at the time of said dissolution. (13) That the liabilities...