Case Name: The Union Central Life Insurance Company v. James P. Curtis
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1880-01
Citations: 35 Ohio St. 343
Docket Number: 
Parties: The Union Central Life Insurance Company v. James P. Curtis.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 35
Pages: 343–351

Head Matter:
The Union Central Life Insurance Company v. James P. Curtis.
1. The condition in a mortgage given to secure a promissory note, payable on demand, provided that if the note should be paid “ within sixty days after such demand,” the mortgage should be void: Held, that demand of payment of the note was necessary to work a breach of the condition ; and that, until sixty days had elapsed after demand, no right of action accrued on the mortgage.
2. A mortgage was given to an insurance company carrying on business under the act of April 16, 1867 (S. & S. 218). The condition of tbe mortgage provided for demand of payment of tbe note secured by the mortgage, by the auditor of state, for the company. It was not a condition to the taking effect or validity of the mortgage, that it should be deposited with the auditor, nor that, if it should bo so deposited, it might not be surrendered to the company or its assigns, as provided for in the statute: Held, that, construing the mortgage in connection with the statute, the demand might be made by any party to whom the mortgage belonged, and who was entitled to collect the money it was given to secure; and that the provision requiring- the demand to he made by the auditor was intended to he operative only in case the mortgage should be deposited with him, and remain under his control, in accordance with the provisions of the statute.
3. Where a stockholder executed to ífie company his note and mortgage in payment of his stock subscription, the stock, under the statute, must be regarded as paid in, and the note and mortgage as given for money loaned or invested by the company. The liability of the stockholder on the note and mortgage is no. less than that of any other borrower; nor do his rights as a stockholder stand on any better footing than those who paid for their stock, but borrowed nothing from the company. '
Error to tbe District Court of Butler county.
The original action was brought by tbe Union Central Life Insurance Company against James P. Curtis, to foreclose two real estate mortgages executed by said Curtis to tbe Home Mutual Life Insurance Company, of Cincinnati. One of tbe mortgages was dated November 16,1867; the other, December 24, 1867, and each was given to secure a promissory note of eight hundred dollars, executed by said Curtis to said Home Mutual Company.
The condition of defeasance in the first mortgage is as follows:
“Provided, nevertheless, that if the note for the sum of eight hundred dollars, bearing date of November 14, 1887, signed by James P. Curtis and Geo. L. Masters, and payable to the said Home Mutual Life Insurance Company, on demand, shall be paid, with interest, within (60) sixty' days after such demand is made by the auditor of the State of Ohio, for the said Home Mutual Life Insurance Company, then these presents shall be void.”
The condition contained in the second mortgage is similar, differing only in the description of the note it was given to secure.
These notes and mortgages were assigned and transferred by the Home Mutual Company to the plaintiff, the Union Central, in pursuance of a written agreement entered into between the two companies, bearing date October 13, 1871, by which the Home Mutual transferred all its assets to the Union Central, and the latter, in consideration, assumed the risks and debts of the former. The agreement is fully set out in the case of Ehrman v. The Union Central Life Insurance Co., heretofore reported, ante p. 324. The petition averred demand of payment, by the auditor, according to the conditions in the mortgages, and that the sixty days therein provided for had elapsed.
The defendant answered, settiug up five defenses, the third of which was withdrawn before the trial.
He also, on behalf of himself and other stockholders of the Home Mutual Company, who might consent thereto, interposed matters by way of cross-petition, upon which he asked to have the agreement between the two companies set aside and declared void, and to have an account taken of the assets and liabilities of the Home Mutual Company, and, after applying the assets to the discharge of such liabilities, to have the surplus, if any, distributed among the stockholders.
The cross-petition was also withdrawn before the trial.
The remaining defenses were, in substance, as follows:
1. That the notes and mortgages were deposited with auditor of state, as security for policy holders; that the withdrawal was in violation of law — were not withdrawn for any purpose for which same were deposited with the auditor; that the plaintiff is not owner of the notes; that the auditor never made any call or demand for payment.
2. That defendant is now, and was on 13th October, 1871, a stockholder in the Home Mutual Life Insurance Company ; that, under a pretense of reinsurance of its risks, the Home Mutual agreed to transfer all its property and assets to the Union Central, which latter agreed to pay all the debts and liabilities of the Home Mutual (except those specified in agreement); and that plaintiff’s only title to the notes and mortgages is by virtue of said agreement. That said agreement was not, in fact, a contract for reinsurance, but was a shift to obtain all the property of the Home Mutual by undue means — to take up the policies issued by the Home Mutual, and issue its own instead, and thereby absorb its property and business. All which it has done, and which is a fraud upon him as a stockholder. That the contract by which plaintiff acquired title to the notes and mortgages was fraudulent, ultra vires, against public policy, and invalid.
3. That plaintiff is only authorized to do a life insurance business, has no power to purchase notes and mortgages from the Home Mutual, by reason whereof the purchase was unauthorized and void.
4. That the notes were given for balance due on capital stock in the Home Mutual held by defendant; that the sole purpose between the Home Mutual and Union Central companies, in transferring said notes and mortgages, was to put an end to the corporate existence of the Home Mutual, to destroy forever its business, and make its stock valueless. That the only consideration for the transfer was that plaintiff should assume and pay the debts of the Home Mutual, and become possessed of all its business, policies of insurance, and other assets. Defendant avers that thereby his said stock did become wholly valueless, and its business transferred to plaintiff', and the Home Mutual ceased to do business, and its existence as a corporation practically ceased, all which was without defendant’s consent.
The allegations of the answer were denied by the reply, except the averment that the plaintiff was a stockholder.
On the trial, the court found the issues in favor of the defendant, and dismissed the petition.
A motion for a new trial was made, on the ground that the finding was against the evidence and against the law. The motion was overruled, and a bill of exceptions duly taken, setting out all.the’evidence. The present petition in error is prosecuted to reverse this judgment.
The following indorsements were on the first mortgage:
“ Cincinnati, 0., November 29, 1872.
“ The within mortgage is assigned to the superintendent of Ohio Insurance Department, in trust for the Home Mutual Life Insurance Company, in accordance with an act passed April 27, 1872. . John Cochnower,
President Home Mutual Life Ins. Co.”
“ Columbus, January 8, 1874.
“ The within mortgage is hereby reassigned to the Home Mutual Life Insurance Company.
¥m. E. Church, Superintendent.”
The following indorsement was on both mortgages:
“ I hereby declare the payment of this note necessary to discharge the liabilities of the Home Mutual Life Insurance Company, and call for payment thereof. Such payment to be made to John M. Phillips, president Home Mutual Life Insurance Company, or his order.
“ May 16,1872. Jas. Williams,
Auditor of State of Ohio.”
There was no evidence that demand of payment of either of the notes had been made, either by the auditor, superintendent of insurance, or by the Home Mutual Company, or the plaintiff, before the bringing of the suit.
It appears from the testimony that at the date of the agreement between the companies of the 18th of October, 1871, the Home Mutual Company was insolvent, and that its liabilities exceeded the value of its assets about fifty thousand dollars ; that a large amount of death claims existed'against it, which were due, and which it was unable to pay, and that its credit was bad.
It also appears that all the policies of the Home Mutual Company have been taken up by the Union Central Company, or exchanged for its own policies, and that the securities deposited with the auditor of state and the superintendent of insurance were not withdrawn until the liabilities of the Home Mutual Company were discharged; that the Union Central Company has fully performed the said agreement on its part, and has paid off the liabilities of every kind of the Home Mutual Company, including nearly six millions of insurance, which was outstanding at the date of the agreement.
It likewise appears that the Home Mutual Life Insurance Company was dissolved by decree of the Court of Common Pleas of Hamilton county, in January, 1877, and a receiver appointed for said company.
The notes secured by the mortgages sued on were given for unpaid balances on the stock subscription of the defendant to the Home Mutual Company, and he never sold or disposed of his stock.
Matthews, Ramsey, $ Matthews and Israel Williams, forthe plaintiff’ in error.
Thomas Millihin and C. D. Robertson, for defendants in error.
[Counsel in this case submitted briefs, making the points here decided and also substantially the argument reported in the Ehrman case, ante, p. 324. — Rep.]

Opinion:
White, J.
Several questions are presented in this ease which did not arise in the ease of Ehrman v. The Union Central Life Ins. Co., ante, p. 324.
As to the questions arising on the first defense.
It appears from the evidence that the first mortgage was assigned to the superintendent of insurance under the act of April 27, 1872, and that it was reassigned by him to the Home Mutual Company on January 3, 1874. It does not appear that the second mortgage was ever deposited or assigned, either to the auditor of state, under the act of April 16, 1867 (S. & S. 218), or to the superintendent of insurance, under the act of April 27, 1872 (69 Ohio L. 150).
Under the act last named (chap. 2, § 9), the superintendent was authorized to permit the company to withdraw any part of the securities deposited, on depositing other securities of equal value ; and by section 22 of the act of March 12, 1872 (69 Ohio L. 39), he was authorized to deliver up to the company, or its assigns, any portion of such securities, on being satisfied that an equal portion of the debts and liabilities of the company had been satisfied, provided the amount of the securities retained was not less than twice the amount of the remaining liabilities.
Like authority was vested in the auditor of state by the act of April 16, 1867.
There is uo evidence that the superintendent of insurance was not warranted in reassigning the mortgage to the Home Mutual Company; and in the absence of such evidence, it will be presumed that the reassignment was properly made, irrespective of the affirmative evidence showing that the indebtedness and liabilities of the company have been discharged.
As to whether a demand of payment was necessary, and, if so, by whom such demand should be made.
The action was brought on the mortgages alone, and to subject the mortgaged premises to sale. It seems clear to us that demand of payment of the notes was necessary to work a breach of the condition in the mortgages. The condition in the mortgage required sixty days to elapse, after demand, before the mortgagor would become in default, and until default no right of action would accrue on the mortgage. Demand is necessary, in order to determine when the sixty days are to commence.
In determining by whom the demand may be made, reference should be had to the statute, under which the company was operating, and under which the mortgages were executed to the company. It was not made a condition to the taking effect or validity of the mortgages that they should be deposited with the auditor of state; nor that, if they should be so deposited, they might not be surrendered to the company " or its assigns," as provided for in the statute. Construing the mortgages, therefore, in connection wnth the statute, we think the demand may be made by any party to whom they belong and who is entitled to collect the money they were given to secure; and that the provision requiring the demand to be made by the auditor was intended to be operative only in case they should be deposited with him, and remain under his control, in accordance with the provisions of the statute.
The proposition relied on in this case, that the plaintiff' acquired no title to the notes and mortgages, by reason of the ultra vires character of the agreement entered into by the companies on the 13th of October, 1871, was determined in the negative in the case of Ehrman, already referred to. It was also held in that case that the mere fact that the party giving the note was a stockholder in the Home Mutual Company, would not affect the right of the Union Central Company to recover on the note, in the ab7 senee of any showing that the transfer of the note was to his injury or prejudice as such stockholder.
The only remaining question, not determined by that ease, arises on th.e fifth defense.
It appears from the evidence given under the issue raised on this defense, that the notes secured by the mortgages now in question, were given for unpaid balances on the stock subscription of the defendant, -to the Home Mutual Company.
The evidence also shows that the purpose of the companies in entering into the agreement of the 13th of Oe tober, 1871, was not, as averred in this 'defense, to destroy tbe business of tlae Home Mutual Company, and to make its stock valueless; nor did the stock become of no value by reason of the transfer's made in pursuance of the agreement. The Home Mutual Company was insolvent, and unable successfully to further prosecute its business. The purpose of the company in entering into the agreement appears to have been to pay its debts and to save its stockholders from further liability; and the performance of the agreement by the parties appears to have had that effect. Instead of the stockholders being injured by the transaction, the evidence shows them to have been largely benefited.
The only remaining question, therefore, on this branch of the case, which distinguishes it from the case of Ehrman, is, whether the fact that the notes and mortgages were given for the consideration above stated, places the defendant in a better situation as respects his liability thereon, than he would have been in, had they been given for money borrowed of the company.
Counsel for the defendant contend that this suit is to be regarded as a suit against a stockholder on his stock subscription ; and not as a suit against a debtor of the company for money borrowed.
The statute under which the company was operating provides as follows: "No company shall be organized under this act with a less capital than one hundred thousand dollars. The whole capital of such company shall, before proceeding to business, be paid in and invested in treasury notes, or in stocks of the United States, . . . or in mortgages or unincumbered real estate within the State of Ohio, worth double the amount loaned thereon." . . .
Under this statute, as between the parties to the transaction, the stock -must be regarded as paid in, and the notes and mortgages as given for money loaned or invested by the company. Such was doubtless the understanding of the parties at the time of the transaction. It is the same, in effect, as if the stock subscription bad been paid to the company, and the money had then been loaned to the defendant on the mortgage security. The liability of the defendant on the mortgages is no less than that of any other borrower; nor do his rights as a stockholder, stand on any better footing than those who paid for their, stock, but borrowed nothing from the company.
It is to be implied from the journal entry that the court found all of the issues in favor of the defendant. In thus finding the court erred. All of the issues should have been found for the plaintiff, except the one relating to the demand of payment. That issue was properly found for the defendant. The findings, therefore, upon all the other issues are set aside; and the judgment is so modified as to show that the action is dismissed on the ground that it was prematurely brought.