Nathan v. Lee

• Decision Date: 24 February 1899
• Parties: NATHAN et al. v. LEE.
• Court: Indiana Supreme Court

152 Ind. 232

52 N.E. 987

NATHAN et al.

v.LEE.

Supreme Court of Indiana.

Feb. 24, 1899.

Appeal from circuit court, Dearborn county; A. C. Downey, Judge.

Bill by Edward M. Lee, receiver of the G. Y. Roots Company, against Samuel Strasburger (Solomon Nathan, executor, substituted) and Rosa E. Levi. There was a decree for complainant, and defendants appeal. Reversed.

Gustavus H. Wald, Givan & Givan and Stephens, Lincoln & Smith, for appellants. Robert & Strapp, Thornton M. Hinkle, and F. W. Hinkle, for appellee.

JORDAN, J.

Appellee is the receiver of the G. Y. Roots Company, a foreign corporation incorporated under the laws of the state of Ohio; and prior to the suspension of its business, as hereinafter stated, its principal office was located at the city of Cincinnati, Ohio. The purpose for which this corporation was created was to manufacture, purchase, and deal in flour, grain, salt, and other merchandise, for profit. To further the object of its incorporation, it became the owner of and operated a large flouring mill and cooper shops, situated on certain described real estate in the city of Lawrenceburg, Dearborn county, Ind. In 1893 Samuel Strasburger, a resident of Cincinnati, Ohio, loaned to this company at different times money amounting in the aggregate to $14,000 and over. This money was used by the company in carrying on its business. These several loans were evidenced by certain promissory notes executed by said company to Strasburger in 1893, payable to him at the city of Cincinnati, Ohio. In 1894 the company also borrowed of Rosa E. Levi, a resident of Cincinnati, Ohio, and one of the appellants in this appeal, money to the amount of $5,000, which was also used by the company in its business; and for the several sums so loaned by her the company executed its promissory notes, payable to her at Cincinnati, Ohio. On August 6, 1895, these notes of Strasburger and Levi were unpaid; and on that day the G. Y. Roots Company was insolvent, having contracted debts and liabilities amounting to $400,000, while its assets at the same time amounted in value to $140,000. On said day it had virtually ceased to be a going concern, but was still in the possession and control of all of its property, but contemplated making a voluntary assignment for the benefit of its creditors. On the said 6th day of August, at its office at Cincinnati, Ohio, in order to secure the payment of the notes held by Strasburger and Levi for the money loaned, the company, by order of its board of directors, executed to each of these two creditors a mortgage upon its real estate on which its mills and shops were situated, in Lawrenceburg, Dearborn county, Ind. These mortgages were in accordance with the form prescribed by the laws of Indiana, and were duly recorded, after their execution and acknowledgment, in the recorder's office of said Dearborn county, on said 6th day of August, 1895. On the same day, after the execution of these mortgages, this company, under the insolvent laws of the state of Ohio, made what purported to be a voluntary assignment to Edwin M. Lee, as its assignee, of all of its property. It also on the same day executed a special deed of conveyance, wherein it was recited that the said company conveyed and warranted to Edwin M. Lee its real estate (describing it), situated in Lawrenceburg, Dearborn county, Ind., to be held by him in trust for the benefit of its creditors; the real estate described in this latter deed being the same which the company had previously mortgaged to Strasburger and Levi. On February 22, 1896, in an action instituted by certain creditors of this company in the circuit court of Dearborn county, Ind., appellee, Lee, was by said court appointed receiver of the said insolvent company, and duly qualified as such; and thereupon, by permission of that court, he instituted this action therein, making Strasburger (then in life) and Levi, together with the said G. Y. Roots Company and its said assignee under its general and special assignments, parties defendant to the action. The receiver by his action invoked the judgment of the court in his favor as follows: First, to set aside the mortgages executed by the said company on August 6, 1895, to Strasburger and Levi; second, to set aside and have declared null and void the two assignment deeds heretofore mentioned, made by the company on the said 6th day of August, so far as the same, or either of them, sought to assign or transfer the property of the company situated in Dearborn county, Ind.; third, that the court order the said Dearborn county real estate sold, freed from the said mortgage liens, and, in the event the said liens should be held valid, that the same attach to the proceeds arising out of the sale of the said mortgaged premises, etc. All the parties appeared to this action and filed their answers thereto, and the matters and things involved under the issues so joined were submitted to the court for its judgment. The only question, however, which the court adjudicated upon this complaint of the receiver, was that which related to the validity of the deeds of assignment, so far as the same affected the property situated in Dearborn county, Ind., and embraced in the mortgages of Strasburger and Levi. Upon this question the court found and adjudged that the said deeds of assignment were invalid, and did not convey any right, title, or interest to the assignee in or to the property of the company situated in Dearborn county, Ind., and further decreed that the said deeds of assignment be set aside and held for naught, and that the title to the said property be held to be as fully and effectually in said company at the time of the appointment of the receiver by the Dearborn circuit court as if such deeds of assignment had not been made. After the rendition of this judgment, Strasburger and Levi each filed a cross complaint in the said action against the receiver, wherein they set up the notes which each held against the said Roots Company, and also the mortgage executed by it to each of the cross complainants on the 6th day of August, 1895, to secure the payment of said indebtedness. The relief which each sought by their respective cross complaints was to enforce the mortgage lien against the proceeds arising out of the sale by the receiver of the mortgaged premises, and each cross complainant prayed that the respective lien of each under his mortgage be protected by the court in the distribution of the proceeds arising out of the sale of the said mortgaged premises. After the filing of his cross complaint Samuel Strasburger died, and appellant Nathan, as his executor, was substituted as a party in his place and stead. The receiver then filed his answer to each of these cross complaints, whereby he sought to defeat the mortgages, and have them adjudged invalid by the court, upon the grounds that they were each executed by the said company as a preference to said complainants at a time when the company had become insolvent and had decided to make an assignment of its property for the benefit of its creditors, and that, therefore, by the laws of Ohio, under which the company had been incorporated, as construed by the supreme court of that state, it was forbidden, under the circumstances, to execute the mortgages in controversy; and the prayer was that each of these instruments be declared invalid, and that the cross complainants take nothing thereunder. The answer of the receiver to each of the cross complaints was held sufficient upon demurrer, and the said complainants replied by the general denial; and, the cause being at issue between the said parties, it was submitted to the court for trial, and upon the evidence the court found for the receiver upon the issues joined upon the cross complaints of Strasburger and Levi, to the effect that the mortgages in controversy were invalid, and did not constitute a lien upon the real estate therein described, nor a valid charge against the proceeds arising out of the sale of the mortgaged premises; and, over the separate motions of appellants for a new trial, wherein they each assigned, among others, as reasons therefor, that the finding of the court was contrary to law, and also contrary to the evidence, the court adjudged and decreed the mortgages to be invalid, and that they be set aside and held for naught.

From this judgment appellants have appealed to this court, and their separate assignments of error call in question the ruling of the court upon the demurrers to the answer of appellee to the cross complaints, and also the overruling of their respective motions for a new trial. The evidence is in the record, and it discloses, among others, the facts heretofore stated. What might be denominated the charter of the corporation in question, or, rather, the governing laws of the state of Ohio relative to the creation of corporations, under which this company seems to have been incorporated and controlled, were introduced in evidence by the appellee. In addition to these statutes, the opinion of the supreme court of that state in the case of Rouse v. Bank, decided June 18, 1889, and reported in 46 Ohio St., at page 493, 22 N. E. 293, was given in evidence upon the trial by the appellee. The holding of the supreme court of Ohio in that appeal was to the effect that a corporation organized for profit under the laws of Ohio, after it had become insolvent and had ceased to prosecute the object for which it was created, could not, by giving some of its creditors mortgages upon its corporate property to secure the payment of antecedent debts, create a valid preference in their favor over other creditors of the insolvent corporation, or over a general assignment thereafter made by such corporation for the benefit of its creditors. The contention of counsel for appellee, in the main, is that, as the G. Y. Roots Company was an Ohio corporation, it was governed by the laws of that state;...