THE FAILURE OF THE OHIO LIFE INSURANCE
AND TRUST COMPANY, 1857
by MORTIMER SPIEGELMAN
Most writers on the economic history of
the United States refer
to the Ohio Life Insurance and Trust
Company as the institution
whose failure precipitated the panic of
1857. The failure is usually
attributed to depreciated railroad
investments and the losses stated
in amounts as high as 7,000,000
dollars.1 A search into the history
of this institution that played a
leading part in the early financial
history of Ohio, however, brings out a
somewhat different picture;
it shows that the failure was due much
more to the inelastic cur-
rency of that period, adverse tax
legislation, and gross mismanage-
ment.
The Ohio Life Insurance and Trust
Company was organized in
Cincinnati in 1834 to bring outside
capital into the state of Ohio.2
It was incorporated on February 12,
1834, by an act of the General
Assembly of Ohio,3 and the
first board of trustees was elected
September 30 of that year. Most of the
stock was subscribed by
nonresidents, as was desired, and an
office was opened for business
in January 1835. The most prominent
among the 35 incorporators
were Jacob Burnet, a former United
States Senator; Calvin Pease,
a judge of the supreme court of Ohio;
Allen Trimble and Joseph
Vance, former Ohio governors; and Alfred
Kelley and Benjamin
Tappan, both connected with state
internal improvements.4
The act of incorporation gave the
company power to perform
the following functions:
1 Lester W. Zartman, Investments of
Life Insurance Companies (New York,
1906), 129.
2 Report of the Special Master Commissioner in the Matter
of the Ohio Life
Insurance and Trust Company, May 19,
1852 (Cincinnati, 1852). Referred to
here-
after as Special Master
Commissioner's Report, 1852.
3 The Charter and By-Laws of the Ohio
Life Insurance and Trust Company
(Cincinnati, 1838).
4 Adelaide R. Hasse, Index of
Economic Material in Documents of the States of
the United States: Ohio (2 vols., Washington, D. C., 1912), I, 262.
247
248
OHIO ARCHAEOLOGICAL AND HISTORICAL
QUARTERLY
1. to make insurance on lives
2. to grant and purchase annuities
3. to make any other contract involving
interest or use of money
and duration of life
4. to receive moneys in trust, etc.
5. to accept and execute all such trusts
... as ... may be committed
by any persons . . . or order of court
of record
6. to receive and hold land under
grants, etc.
7. to buy and sell drafts and bills of
exchange.
It is interesting to note that the first
three privileges pertain to
what was then the new business of life
insurance. However, the sub-
sequent history of the company shows
that this became the least im-
portant part of the total business.
According to the charter, capital
stock of $2,000,000 was required which
had to be invested in bonds
and notes bearing interest not greater
than seven per cent and
secured by unincumbered real estate
within Ohio valued at least
double the sum loaned. It was permitted
to establish agencies with-
out banking powers. Of the twenty
members of the board of trustees,
five might be from outside of Ohio.
Premiums and profits were to be
invested in federal, state, municipal,
and industrial securities, but
not over $25,000 in stock was to be held
in any one private company.
An annual statement of affairs was
required by the supreme court,
which might recommend an investigation.
Until 1843 bills and notes
might be issued to an amount equal to
twice the funds deposited for
less than one year but not greater than
one half the paid-in capital.
Should specie payment be suspended, or
interest charged at more
than seven per cent, the charter would
be declared forfeited. No
higher taxes were to be levied on the
capital stock or dividends than
could be levied on other incorporated
banks of the state.
In a report covering the results of an
investigation of the com-
pany's affairs for 1836, Phineas B.
Wilcox, who was appointed to
that duty by the supreme court, said
that "the affairs of the institu-
tion have been and still are conducted
with more than ordinary
ability," that the investments were
believed to be "safe, prudent, and
productive," and that "those
holding the present engagements of
this institution are safer than
those holding the engagements of any
other moneyed corporation of the
State."5 Thus the company was in
5 Second Report of the Master
Commissioner in the Matter of the Ohio Life
Insurance and Trust Company, 1837 (Cincinnati, 1837).
OHIO LIFE INSURANCE AND TRUST CO. 249
a position to weather the panic of 1837,
which began in May and
had effects lasting through 1843.
However, shortly after the out-
break, the scarcity of specie made it
necessary for this institution,
acting in conjunction with other banks
in Cincinnati, to remain
closed from May 17 to June 14.
In his report Wilcox said, "There
is a strong tendency to exer-
cise its banking powers." The
implication is that this banking busi-
ness was at the expense of the insurance
and trust department of the
business.
The annual statement for 1838 shows that
twenty persons were
insured for $53,500 and paid $1,311.30
annually. Since the com-
mencement of business the total premiums
were $4,921.75, while
deposits in the banking department were
over $600,000.6 By 1850 the
number insured had increased to only 90,
their total insurance being
$265,000 and their annual premiums
$5,021.01. In that year
deposits in the banking and trust
departments were nearly $2,000,-
000.7 The role of the company in the
development of the life insur-
ance business in this country was indeed
negligible.
Very soon after the company had opened
for business in Cin-
cinnati, an agency of the banking
department was established in
New York. At the start it was managed by
the principal cashier,
and semi-monthly reports were required
from it at the head office. A
letter by the president, Charles
Stetson, dated June 5, 1848, stated
clearly the purpose of the cashier in
New York:
He is placed there to receive and take
charge of any bills of exchange,
or notes, payable in that city or
vicinity, all deposits of money which may be
sent him by this company, or any other
banking company, or individuals in
or out of this state, to pay checks or
drafts which may be made upon him,
predicated on such bills of exchange,
notes, collections, whenever they may have
matured in his banks.... He is also
Transfer Agent of the State of Ohio....
Any funds in his hands, not wanted for
immediate use, from whatever source
they may have been derived, he has
authority to invest, in the manner set
forth in his instructions.8
6 The Fourth Annual Report of the Ohio Life Insurance and Trust
Company,
1838 (Cincinnati, 1838).
7 "Annual Report of the Ohio Life
Insurance and Trust Company Sub-
mitted by the Auditor of State to the
House of Representatives in Answer to a Resolu-
tion, January 25, 1851," in 49th
Ohio General Assembly, 1 sess., Executive Documents
(House), pt. 1, 610-632.
8 "Letter of the Auditor of State
in Relation to the Ohio Life Insurance and
Trust Company, March 19, 1849," in
47th Ohio General Assembly, 1 sess., Executive
Documents, pt. 2, 133-144.
250
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
The same letter also says "that
this company have no agents, in or
out of the state of Ohio, to loan money,
discount notes, etc." The
company had two trustees in New York to
advise the cashier on
important matters. For the services of
its cashier as transfer agent
of the state of Ohio in New York the
company received $2,500 a
year.9
Since its inception the company had been
paying to the state a
uniform tax of five per cent upon
dividends.10 The first signal of the
future trouble with taxation problems
was occasioned by the desire
of the state to decrease the circulation
of small bills. With this pur-
pose in view the general assembly passed
an act, dated March 14,
1836, increasing the tax on dividends
declared by banks to twenty
per cent, with the provision that if
they did not circulate bills or
notes less than three dollars after July
4 or less than five dollars
after July 14, 1836, the tax would be
reduced to five per cent.11
The lesser rate of course was the
preferable, and the circulation
of bills and notes under the
stipulations mentioned in the charter
was practically discontinued long before
1843.12 It appears an at-
tempt was made to circumvent the
restriction by selling drafts upon
itself, for a court decision in 1839
states that the section of the
charter granting the power "to buy
and sell drafts and bills of
exchange confers no power to issue
evidences of debt designed to
circulate as money."13
In the decade from 1840 to 1850 the state was often embar-
rassed financially. Many attributed this
predicament to its liberal
policy in regard to internal
improvements.14 It was natural, then,
that the new constitution of 1851 should
contain a clause such as
this: "The property of corporations
... shall be subject to taxation,
the same as the property of private
individuals." It was estimated
that this provision would triple the tax
the company had been pay-
ing. On April 13, 1852, the general
assembly passed a new tax law,
9 Report of the Master Commissioner in the Matter of the
Ohio Life Insurance
& Trust Co. to the Judges of the State of Ohio, 1855 (Cincinnati,
1855).
10 Special Master Commissioner's
Report, 1852.
11 Ibid.
12 Ibid.
13 Ohio Reports, IX (1839), 292.
14 William F. Gephart, Transportation
and Industrial Development in the Middle
West (Columbia University Studies in History, Economics
and Public Law, XXXIV,
New York, 1909), 149, fn.
OHIO LIFE INSURANCE AND TRUST CO. 251
the tenth section of which stated, in
effect, that deductions from the
total property listed might be made for
outstanding obligations
"provided, that nothing in this
section shall be so construed as to
apply to any bank, company or
corporation, exercising banking
powers or privileges."15
Thus banks were taxed on their liabilities
in addition to their property. The
company declined to pay taxes
under both these laws until its legal
liability under them had been
established. There were two bases for
its contention. First, the
charter had stated that no higher taxes
should be levied than might
be levied on other banking institutions.
It is difficult to see, however,
how this argument held because the tax
laws applied to all banks.
Secondly, it was understood that by
withdrawing the circulation of
small bills, pursuant to the act of
March 14, 1836, the tax there-
after was to be only five per cent on
dividends.16 However, a decision
was rendered subjecting the company to
both these tax laws,17 and
it was the current opinion, therefore,
that it would be necessary for
the company to wind up its affairs.18
An interesting situation arose out of
the tax legislation. Samuel
Foote, a trustee resident in
Connecticut, enjoined his fellow trustees
from paying taxes to the state,
contending that the trustees in Ohio
failed to prevent the unlawful
collection of taxes by the state, and
further, that he had no legal recourse
against the state. It was de-
cided the claims were mere fictions on
the part of the trustees to
evade the law and that the whole affair
was a collusion.19
The report of the special master
commissioner for 1852 sum-
marizes the profitableness of the
company as follows:
Hitherto, the investment has been safe
and the profits have been reason-
able: still the stock has not been as
productive as is generally supposed, nor
as was probably anticipated. Dividends,
when made, are made semi-annually
in January and July. They have not
however been uniformly made. Losses
have been sustained which prevented it.
The highest semi-annual dividend at
any time was 4 1/2 percent, the lowest 3
percent. The entire amount of
dividends declared, including that of
January last, had been 105 1/4 percent,
15 Laws of Ohio, L, 141.
16 Special Master Commissioner's Report, 1852.
17 Ohio State Reports, I (1852-53), 563.
18 Bankers Magazine, IX (1854), 87.
19 Biennial Report of the Attorney General to the Governor
of Ohio, January 1,
1854 (Columbus, 1854), 17-23.
252
OHIO ARCAEOLOGICAL AND HISTORICAL QUARTERLY
or an average of less than 6 1/4 percent per
annum. The earnings of the com-
pany, as its affairs are now conducted,
may be fairly estimated at 8%.
Among the losses referred to was one of
$400,000, in 1847, occa-
sioned by the failure of a firm in
London.20
It appears that the period from 1852 on
was one of increasing
difficulty in operation, for the
minority report of the committee on
finance to the Ohio Senate early in 1857
recommended:
1. an amendment of charter, authorizing
an increase of capital stock,
to be used as banking capital.
2. an amendment restoring to the company
the right to issue notes of
circulation.
3. a law directing that the company
shall be taxed on its profits by the
uniform rate of 5 percent thereon,
instead of the general levy on the grand
duplicate, as now.21
A review of certain economic events
occurring in these years
may serve as a background for the panic
of 1857. Briefly, prosperity
was induced by these conditions: the
Mexican War which caused
abnormal expenditures; the discovery of
gold in California; the
revolutionary disturbances in Europe
which halted production there;
the famine in Ireland which caused an
influx of cheap labor and
provided a market for wheat; an increase
of exports to England
where free trade had recently been
adopted; the extension of rail-
roads to the West; and the additional
markets provided by the ter-
ritories acquired by the Mexican War.
However, toward the end
of the period European conditions became
normal and production
was resumed; the railroads were reaching
into undeveloped terri-
tories; and gold discoveries, with the
resulting inflation of the circu-
lating medium, stimulated too rapid
industrial development. Govern-
mental revenue had been increasing so
rapidly that it was necessary
to lower the tariff in 1857, and the
increase in imports caused a
heavy drain upon the specie of the
country.22 A contemporary,
describing the summer of 1857, stated
that up to about August 8,
when the banks began to contract their
loans, the reduction in loans
20 "Letter of the Auditor of State
. . ., March 19, 1849," loc. cit.
21 "Minority Report of the Committee on Finance Relative to a Memorial
of
the Ohio Life Insurance and Trust
Company Asking Amendments of Its Charter and
a Law Taxing the Company on Its
Profits," in 52d Ohio General Assembly, 2 sess.,
Senate Journal, LIII, 559-561.
22 James G. Blaine, Twenty Years of
Congress: from Lincoln to Garfield (2 vols.,
Norwich, Conn., 1884-86), I, 197-198.
OHIO LIFE INSURANCE AND TRUST CO. 253
had been considered seasonal. The
failure of a produce house, re-
ports of dishonest jobbing, and the
misuse of funds in a railway
did not seriously disturb credit.23
On August 24, the failure of the
Ohio Life Insurance and Trust Company
was announced.
Several days before payment was
suspended, the president
of the company was called to New York
from Cincinnati and, after
consulting the cashier and trustees in
the former city, made this an-
nouncement:
Office of the Ohio Life Ins. & Trust
Co.
New York, August 24, 1857
The unpleasant duty has devolved upon me
to state that this company has
suspended payment. The event has mainly
been brought about in consequence
of making loans here to parties who are
unable to respond at this time. I will
add that the capital of the company,
$2,000,000, is sound and reliable,
exclusive of such loss as may arise from
insufficiency of securities pledged
for loans above referred to.
C. Stetson, President24
Upon receipt of the news in Cincinnati,
a further announcement
was made as follows:
Having very unexpectedly received
advices from New York that the
office of this company had suspended
this day, the Board of Trustees deem
it expedient to close its doors and
suspend payment until they can be fully
advised of the true situation and
condition of that office. The Board of
Trustees also deem it proper to say to
the public that they regard the means
of the company ample to meet all its requirements
and that early attempts
will be taken to resume business.
By order of the Board,
S. P. Bishop, Ass't. Cashier
August 24, 185725
Various speculations and suspicions
arose as to the true cause
of the failure, most of which concerned
stock activities in New York
and mismanagement. The suspension of
activities was not viewed in
the West with any alarm, for business
conditions were considered
good.26 In New York there was
great excitement in the financial
23 James S. Gibbons, The Banks of New York, Their Dealers, and the
Panic of
1857 (10th ed., New York, 1873), 344.
24 New York Times, August 25,
1857.
25 Cincinnati Daily Gazette, August 25, 1857.
26 Ibid.
254 OHIO
ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
district
where the failure was attributed to the company's activities
with
railroad securities. Within four days attachments were granted
there as
follows:
American
Exchange Bank ................................ $ 446,969.26
Ocean Bank
.......................................................... 140,000.00
Phoenix
Bank ......................................... 35,875.00
Corn
Exchange Bank ................................. 15,000.00
M
ercantile Bank
..................................................... 2,322.00
Bank of
America ...................................... 5,000.00
Robb,
Hallett & Co ........................................... 23,264.94
Ingoldby,
Halstead et al. .............................. 316.93
Stebbins and
Bloodgood
....................................... 20,000.00
Edward,
Nathaniel & Edw. Jr. Prince .................70,393.00
Brown Bros. &
Co. ......................................... 100,000.00
Abernathy,
Collins, Sullivan & White ................ 563.00
Alex.
Dennistown et al.............................. 73,166.67
Franklin
Branch of State Bank of Ohio .............. 59,000.00
Bank of
Georgia
................................................. 22,350.83
Western
Reserve Bank ............................ 63,428.25
M
erchants Bank ..................................................... 1,948.89
Total
.............................
$1,079,598.7727
To
substantiate the claims of strength in the announcements of
the
24th, this statement was published in Cincinnati newspapers:
Official
Statement of the Principal Office
of the
Ohio Life Insurance & Trust Co.,
Cincinnati,
August 26, 1857
Being as
yet without any explanation of the condition of the agency
in New
York from any reliable source in that city, the trustees in Cincinnati
deem it
due to the public to make the following statement of the affairs of the
principal
office. This statement the trustees regard as entirely reliable and a
fair and
just estimate of the means of the company here.
Means
Loans,
Trust DepT.
......................................................$2,296,102.47
" Banking .................................................................. 1,838,996.23
Real
estate ................................................ 243,605.20
27
New York Tribune, August 26-28, 1857.
OHIO
LIFE INSURANCE AND TRUST CO. 255
Nominal Cash
Value Value
County
and city bonds ................................ $121,150 $101,936
Cin.,
Ham. & Dayton R.R. Bonds ........... 200,000 164,000
R. E.
Junction Bonds ................................... 125,000 125,000
Other
R.R. Bonds ....................................... 110,500 58,524
Cin.,
Ham. & Dayton R.R. Stocks ........... 31,500 20,475
Other
reliable stocks ....................................21,900 21,900 491,835.00
Due
from other banks
............................. 158,196.48
Cash on
hand
.................................................. 249,792.00
$5,278,527.38
Liabilities
Circulation
................................................... $
4,040
Deposits,
Banking Dept. ............................ 1,191,098
,
Trust Dept.
.................................... 798,488
Due
to N. Y. Agency ................................... 652,895
" other banks
......................................... 192,515
Dividends
unpaid ........................................ 94,806 2,933,842.00
Excess
of means over liabilities (excl.
capital) .................................... $2,344,685.38
By
order of the Board of Trustees,
S. P.
Bishop, Ass't Cashier28
The
truth of the statement depends, of course, upon the valua-
tion
of the assets, especially at a time when business conditions
were
becoming unsettled. It should be remembered that this state-
ment
does not contain the liabilities of the New York office. Acknow-
ledgment
of inability to continue the business was not long in
coming.
Ohio
Life Insurance and Trust Co.
Cincinnati,
September 26, 1857
The
Board of Trustees being satisfied by the pressure of the unexpected
circumstances
which surround them, that they cannot discharge at this time
28 Cincinnati
Daily Gazette, August 27, 1857. Quotation edited and revised by
the
author.
256
OHIO ARCHAEOLOGICAL AND HISTORICAL
QUARTERLY
all their obligations, and yielding to a
sense of duty, have made an assignment
of the assets of this institution to
Chas. Stetson, John C. Wright, Samuel
Fosdick, Samuel Broadwell, Abraham
Taylor, George Crawford and Clement
Dietrich. S. P. Bishop, Ass't Cashier29
All of the men named as assignees were
on the board of
trustees. The supreme court was notified
of the act of assignment
and the corporation was dissolved.30
Some light on the manipulations of the
office in New York may
be gathered out of the case of the
Merchant's Bank of Cleveland vs.
the Ohio Life Insurance and Trust
Company. The action was to
recover $157,852.64. It was alleged the
company had bills and notes
for this amount in New York in August
1857 which were to be held
for collection for the bank, and that
without authority the company
pledged and hypothecated them for its
own use, thus placing them
out of the power of the bank. The court
agreed that "a very wrong-
ful and improper act may have been
committed."31 In the case of
Dennistown, Wood & Co. vs. Merchant's
Bank of Cleveland, the de-
fendant, being sued as endorser, claimed
the notes were fraudulently
put in circulation by the Ohio Life
Insurance and Trust Company.32
For almost a year following the failure
no record was found of
any activity on the part of the
self-appointed assignees toward
liquidating the assets of the company.
By the time of the anniversary
of the failure the inactivity of the
assignees was openly commented
upon, and by the 31st of August it was
admitted to the creditors:
The assignees may never be able to
ascertain the exact truth connected
with the property covered by the assignment
but as soon as these vexatious
law suits are determined, and the
assignees can convert the assets under their
control, they will be able to close up
the trust.
The same report contained a detailed
account of assets and
liabilities at the New York and Cincinnati
offices, it being specifically
stated, however, that these were
estimates. Their condensed statement
showed a shortage of $1,200,000.
29 Cincinnati Commercial, September 28, 1857.
30 Biennial Report of the Attorney
General for the Years 1858-9 (Columbus,
1860), 10.
31 Cincinnati Superior Court Reports, I (1854-58), 469.
32 Ibid., II
(1858-60), 52.
OHIO LIFE INSURANCE AND TRUST CO. 257
Condensed Statement
Liabilities at Cincinnati ................................. $ 748,753.61
Liabilities at New York
Admitted
............................................................ $1,628,995.33
Disputed .......................................... 309,332.19
1,938,327.52
Total liabilities
......................................................... $2,687,081.13
Offsets (to liabilities) at
Cin. .............................. 141,983.99
" at N.Y. .......................... 79,211.53
Attachments at Cincinnati
.................................... 137,897.38
" at
New York .................................... 591,281.50
Covered liabilities ........................................ 950,374.40
Uncovered liabilities ......................................... $1,736,706.73
Assets at Cincinnati ................................. 701,412.63
Assets at New York
.......................................... 778,050.40
Total assets ...................................... $1,479,463.03
Less covered liabilities
..................................... 950,374.40
Assets available for uncovered claims33 ............. $ 529,088.63
The negligence of the assignees in liquidating the
assets led
to action on the part of those creditors who were
deeply involved.
On one day, October 18, 1858, charges against the
assignees which
were substantially the same, were made in two different
courts by
different creditors. In the United States Circuit
Court, Southern
District of Ohio, in the case of James C. C. Bell,
Robert Grant, and
James Martin Bell vs. The Ohio Life Insurance
and Trust Company,
charges were made:
1. that the plaintiffs secured a judgment of
$259,293.50
against the company, but could find no goods on which
to levy.
2. that, besides the loss of capital stock amounting to
$2,000,000, there was an additional loss of assets
leaving an
indebtedness of $1,250,000.
3. that this great loss was caused by gross negligence
and
want of ordinary care on the part of the trustees, in
that,
33 American Railroad Journal, XXXI (1858), 594.
258
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
(a) they failed to make examinations of
the company as
required by law;
(b) they made loans to railroads and
individuals of large
sums upon insufficient security,
contrary to the by-laws of the
company;
(c) they declared and paid dividends
without proper
examination of the company;
(d) they failed to hold monthly meetings
as required;
(e) they allowed Edwin C. Ludlow,
cashier at New York,
"to borrow money for use of said
company, unlimited as to
amount, and at such rates of interest,
time and other conditions
as he might determine, to pledge notes,
bills and stocks and
other choses of company as
collateral," without supervision of
the trustees, and that by these
transactions, large losses were
sustained, the amount of which the
plaintiffs could not ascertain
accurately, but were informed by the
assignees to be $3,000,000;
(f) they failed to check Ludlow from his
disastrous
course;
(g) after the failure, they proceeded to
pay certain cred-
itors in full and thus disposed of about
$1,000,000 in assets;
(h) they made a partial distribution of
assets with total
ignorance of the true conditions of the
company;
(i) it was commonly believed the company
would not
meet its liabilities, and the market
value of claims against it
went below their true value; the
trustees bought and applied
them to their individual debts to the
company at par;
(j) the trustees, as assignees, refused
to allow exami-
nations of the books and rendered no
accounting to creditors;
(k) the trustees gave Ludlow a release
from all liability
to the company, fearing he would expose
their complicity.34
A week later the assignees filed
affidavits in the same court,
denying the charges in general.35
Charles Stetson, who seems to
have been the guiding spirit in the
preparation of the affidavit, said
34 Cincinnati Daily Gazette, October 25, 1858, and subsequent issues.
35 Ibid., October 25, 1858.
OHIO LIFE INSURANCE AND TRUST
CO. 259
that he was in New York three months
after the failure investigating
it when named an assignee, and would not
have accepted the assign-
ment; that he acted in good faith; and
that there was no fraud on
the part of the trustees. However, he
admitted buying claims at a
discount and applying them to his debts
to the company. He denied
that Ludlow knowingly was permitted to
act as it was charged he
did, saying that Ludlow's actions were
not disclosed to the trustees
but were concealed from them.
Furthermore, Stetson asserted that
Ludlow's duties were defined in written
instructions and that he
knew nothing of their violations until a
short time previous to the
failure. A short time before suspension
two trustees examined the
New York office and found nothing wrong.
It was denied that
preference was given to creditors, but
admitted that certain banks
were paid in the belief that all its
debts could be paid. Examination
of the books was not permitted without
the authority of the court.
The assignees could not render a
satisfactory accounting until the
affairs in New York were settled. The
trustees, under the impres-
sion the company was solvent, proceeded
to make settlements on
terms they believed advantageous. S. J.
Broadwell, a trustee, ad-
mitted settling with Ludlow, after
satisfying himself that all that
could be had from the latter could not
be procurable otherwise.
From the charges and answers outlined
above it seems that the
trustees were really guilty of
mismanagement, especially in their
governing of the New York office.
The second of the two suits against the
assignees was that of
Spinning and Brown vs. The Ohio
Life Insurance and Trust Co.,
et al., which was brought up in the
superior court of Cincinnati on
the same day as the case just
discussed.36 Charges not included in
the first case were:
1. that the trustees paid in full a debt
to Hamilton County for
which they were responsible as
endorsers;
2. that after the trustees disposed of
the larger part of the
assets, they made an assignment of what
remained to themselves
for the benefit of creditors.
36 Cincinnati Superior Court Reports,
II (1858-60), 336.
260
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
The Cincinnati court appointed Richard
Mathers, the local
sheriff, as receiver. J. P. Kilbreth,
appointed by the United States
court, demanded the assets of Mathers
who was the first to secure
them. Each of the receivers caused the
other to be held in contempt
and thus there was begun a conflict of
courts. The delay caused
by this controversy was irritating to
the creditors, fifty of whom
held a meeting in Cincinnati on
Wednesday, November 10, 1858,
from which lawyers were excluded.37
It was agreed to support
Kilbreth as receiver and the United
States court was preferred as
the court having jurisdiction because
1. it served the interests of the
creditors better;
2. a preponderance of the claims were in
this court;
3. the war of courts was obstructing
justice;
4. some of the trustees, to cover up
their deeds, had taken a
part in complicating the proceedings of
liquidation.
Copies of these resolutions were sent to
both courts. The
matter was settled in the probate court
of Cincinnati when J. P.
Kilbreth and Charles Reemelin were
appointed joint trustees
January 25, 1859. Both of these men were
prominent locally.
Kilbreth was a director of the Ohio Live
Stock Insurance Company,
and Charles Reemelin was prominent in
the Ohio legislature.
Reemelin asked to be relieved of his
trusteeship and was released
November 25, 1859.38
While Sheriff Mathers held the assets as
receiver, he proposed
a schedule of the assets in his
possession. The schedule is interest-
ing, for it offers an opportunity to
learn, roughly, the extent to
which the depreciation of railroad
investments affected the financial
standing of the company. Rearranged
according to railroads, the
schedule is this:
20 Income Bonds, Cleveland &
Pittsburgh R. R. ........ $ 20,000
Dividend Bonds, Cleveland &
Pittsburgh R. R......... 20,000
38 Bonds (3rd mortgage), Cleveland &
Pittsburgh R. R.
..................................... ..... ..
17,500
200 Bonds (4th mortgage) Cleveland &
Pittsburgh R. R
.......-.................... ........
200,000
37 Cincinnati Daily Gazette, November
11, 1858; Bankers Magazine, XIII (1858),
508.
38 Cincinnati Daily Gazette, February 10, 1860.
OHIO LIFE INSURANCE AND TRUST CO. 261
171 Coupons, Cleveland & Pittsburgh R.
R.................. 5,985
$ 263,485
153 Bonds (3rd mortgage) Marietta & Cincinnati.... 153,000
66 Income Bonds, Marietta & Cincinnati
.................. 66,000 219,000
100 Bonds, Cin. Hamilton & Dayton
...................... 100,000
2 Shares
......................................................... 200
100,200
192 Bonds, Hillsborough & Cincinnati
................................ 192,000
10 " Great Western
..... .............. ............. 10,000
100 " Norwich &
Worcester
......................................... 10,000
2 " Indianapolis &
Cincinnati ........... ............... . 2,000
9 " Ohio &
Mississippi (construction bonds) .......... 8,000
12 " Hempfield ...........
..................................................... .... 6,000
10 " Toledo & Illinois .................
................................ 5,000
8 " Florida Freeland ..................
................. 8,000
15 " Fort Wayne &
Southern ............. .......... . 15,000
31 " Tiffin &
Fort Wayne ........................................
...... 31,000
51 " Junction R. R. (with guarantee)
..................... 51,000
30 " Henderson &
Nashville ................................ 30,000
200 Shares Cin., Cleveland & Delhi Park
...................................... 10,000
14 Shares Madison, Peru & Indianapolis
........................... . 700
771 Shares Madison River & Lake Erie
....................... . 38,550
Total Railroad Securities
................................. $
999,935
Individual notes, good, bad and doubtful
...................................... 318,431.05
Cash
......................................................................14,000.00
3 Bonds, Knox Co., Ohio
......................................... 300.
3 " Decatur Co., Indiana
...................................... 3,000.
1 " Traveston Coal Company ........ ............................. 1,000.
67 " Knox Co., Ohio ..............
......................... 6,700.
13 " Jeffersonville, Indiana ........................ ................ 13,000.
3 " City of Cincinnati ................ ............... . ..... 3,000.
4 " City of Covington ................... .. ...........
.4,000.
9 " Township of Dayton .... ............................... . 4,500.
1 " Lafayette Co., Ky. ..................................... 1,000.
5 " Boyle Co., Ky .....................................
.................... 5,000.
2 " Clark Co., Ohio ......
....... ......................................... 2,000.
60 Shares Vincennes Branch, State Bank of Indiana
............. 3,000.
Assets other than Railroad Securities
.............................$ 378,931.05
Total assets listed at face value
................................ .........
$1,378,866.0539
39 Ibid., November 1, 1858.
262
OHIO ARCHAEOLOGICAL AND HISTORICAL
QUARTERLY
Comments on the schedule found in the
source from which it
was taken were to the following effect:
(1) some notes were dated
to 1848; (2) other notes were renewed
several times; (3) some
notes were protested and kept on hand;
(4) the city and county
bonds were good; (5) many of the
railroad securities were worth-
less. City and county bonds amounted to
only $60,000, while
railroad securities totaled $1,000,000.
There was over $300,000
in notes ranging from good to bad in
value.
A few facts, gathered from meager
sources,40 concerning the
railroads listed may be of some
interest. Cleveland and Pittsburgh
Railroad shares were quoted as follows:
par, 50 dollars; July 21,
1857, 391/2; August 25, 1857, 20;
September 25, 1857, 15;
November 3, 1858, 9. For first mortgage
bonds of the same road, 93
dollars was asked on September 25, 1857,
but this fell to 50 by
November 3, 1858. No quotations were
found for the third and
fourth mortgages. A meeting of creditors
of the Marietta and
Cincinnati Railroad was held January 8,
1858, because the road
could not pay interest due, its notes
were being protested, and its
laborers were going unpaid. Cincinnati,
Hamilton, and Dayton
Railroad shares held steady at about 65
dollars during the autumn
of 1857, but were only 45 on November 3,
1858. In the same
period its first mortgage bonds fell
from 90 to 70. On August 19,
1857, Hillsborough and Cincinnati
Railroad shares sold at 17
dollars and the first mortgage bonds at
52. The Great Western
was sold on October 16, 1857, to a Mr.
Correau for $1,100 with
liabilities of over $5,000,000.
Indianapolis and Cincinnati Rail-
road bonds were quoted at 78 on August
25, 1857, and at 75 on
November 3, 1858. Ohio and Mississippi
Railroad construction
bonds were 52 in August 1857, and in the
same month its shares
ranged from 10 to 12. The road was
undergoing financial diffi-
culties because of a recent expansion.
The Hempfield Railroad,
partially completed and isolated, had
been in the hands of bond-
holders since April 1857, and its bonds
were converted to preferred
stock. Florida Freeland bonds were 77 in
November 1858. Some
time in January 1857 the directors of
the Henderson and Nashville
40 American Railroad Journal, XXX (1857), XXXI
(1858); Henry V. Poor,
History of the Railroads and Canals
of the United States (2 vols., New
York, 1860), I.
OHIO LIFE INSURANCE
AND TRUST CO. 263
announced that their
London agent had misappropriated $600,000
in bonds. Subsequently, counties through which the
road ran
refused credits for
improvements. Late in August 1857 Madison
River and Lake Erie
Railroad shares were 15.
When Kilbreth and
Reemelin were appointed trustees of the
company by the probate
court of Cincinnati, they were ordered to
"file an
inventory of all assets of said company, with a schedule
of the creditors, and to
convert all said assets into money without
any unnecessary delay,
and divide same equally among creditors."41
In accordance with
these instructions Kilbreth, who remained as
sole trustee, prepared
a report showing the claims by and against
the defunct
company. His report showed that only
$361,525.63
was settled by the
debtors of the company and that most of this
never reached him
because of the great amount of it applied to
attachments and
counterclaims. Claims unsecured by attachments
or other means
received a ten per cent dividend.
Kilbreth's
accounting of the
current affairs of the company, dated February 6,
1860, was as follows:
Accounts against all
parties gathered out of N. Y. books................ $2,970,956.17
Accounts and notes
against sundry parties on the Cin. books ...
596,727.62
List of stocks, bonds,
etc., amounting nominally to ....................... 1,090,126.00
List of bonds &
other real estate, taxable value being.................... 55,620.00
List of claims in
judgment, most of them of long standing
and small value ....................................
............ 69,133.65
Assets, the greater
portion uncertain & nominal ................ $4,782,563.44
Creditors whose claims
had been allowed by Kilbreth and Reemelin
up to November 25,
1859, were:
Depositors in the bank
department
Fully adjusted
......... ...................... ......... $208,222.66
Not denied, but not
fully adjusted .......... 51,048.10
$ 259,270.76
Checks of Cincinnati
office in New York .............................. 38,273.50
Checks of N. Y. office
on Amer. Exchange Bank
Adjusted ...................................... 4,955.85
Not adjusted, but not
denied .......................... 78,157.88
____ _____ 83,113.73
41 Bankers Magazine, XIV (1859), 281.
264
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
Certificates of deposit in banking dept.
Adjusted ........................... .
20,231.21
Not adjusted, but not denied
......................... 4,515.23
24,746.44
Certificates issued by former assignees
...............................
133,622.37
Bankers, banks, railroad and other
accounts
principally from the N. Y. Office
Adjusted .....-............. .. 399,218.91
Not yet reduced to adjustment, but will
most probably have to be
adjusted............... 835,516.55
1,234,735.46
Other
claims adjusted
......................................
13,346.82
20 year certificates, $38,000 of them
not
yet
presented ............... ..................... 62,598.64
Certificates, trust dept., $51,652.26
not yet presented......... 226,239.58
42
$2,075,947.3042
Judging from this report Ludlow's
unauthorized loans amounted
to almost $3,000,000. The total of
stocks and bonds agrees sub-
stantially with the amount found by
Sheriff Mathers, after deducting
the notes and cash. It should be noted
the assignees managed to
issue about $130,000 in certificates
during their period of control.
From January 25 to November 25, 1859,
the trustees collected
$163,547.73 and disbursed $127,924.97,
of which $86,128.72 went
to unsecured creditors.
Beyond this point nothing of importance
was found, the sub.
sequent events being mostly petty in
nature and having little signifi-
cance in the story of the failure.43
The failure of the company cannot be
laid to any one particular
cause. The company's investments were
not as profitable as had
been expected and heavy losses were
sustained. Without much
doubt the heavy taxation imposed by the
state weakened the com-
pany's financial position. Finally, the
speculative manipulations
of Ludlow, the New York cashier, were
sufficient to cause a collapse
42 House of Representatives, 36 cong., 1
sess., Executive Documents, VIII,
206-208.
43 "Report of the Attorney General,
January 1, 1862," in 55th Ohio General
Assembly, 1 sess., Executive
Documents, pt. 2, 256; "Biennial Report of the Attorney
General for the Years 1862 and
1863," in 56th Ohio General Assembly, 1 sess..
Executive Documents, pt. 1, 410-411.
OHIO LIFE INSURANCE AND TRUST CO. 265
at the slightest depression in business.
The fact that Ludlow's activ-
ities proceeded to such extent without
the notice of the trustees is
indicative of carelessness or complicity
on their part; in either
case it was fundamentally bad
management. Although many of
the railroad investments were
depreciated before the failure, by far
the greater part of the depreciation
occurred after the company
closed its doors to business. It must be
concluded that poor rail-
road investments were the least cause of
the failure and that, had
not the other causes been operating, the
company might have
weathered the panic of 1857.
From the condensed report of the
assignees and the charges of
Bell and Grant, it appears that the
failure amounted to a sum of
from 3,000,000 to 3,500,000 dollars.
This includes a capital loss
of 2,000,000 dollars. A very crude
approximation from Kilbreth's
report would set the failure at the same
amount.