, 1873-01-04
ElR. ECAMMON AZ 4 TRUSTEE

Tlo position Of Mr. ]. Y. Sca1ulnon III with
holding $4,000 Of Tho Mutual Security Insur-
a'lco Company's fluids from tho creditors of
Tint institution cannot Lo bcttor defined. nor
lepo, tlIan by giving q summary Of Tho arg,s-
ment mado before Judge Drnmmond by alcssrs
williams and Thompson. tho attorneys for tho
Company. Tho iasuo joincd was Mr.. Scamnaon'g
Claim that tho Company was indebted to him in
the sum of $4,000 for losaos upon policies Of i'll
saranco, and that lle held tho 3i0, 900 M bor-
rover and not III tho capacity Of Treasurer of
the Company. There was n furthor question
about tho payment of certain atock notcs which
Mr. scanlmon had giyon, but, aa tho
Court lad already decided that losses
upon policies could not be used aa
set-of against stock notcs, AlcssrH. Williams
and Thompson did not discuss it. Tho roa1
qncntion, then, was, whether Mr.. scamsnon held
tho $40, 600 as TroaBuror Of the Company Or as a
borrower
Tho history Of the Company, an shown by tho
oyitlonco WAS III follows It Twas organized in tho
year 1874, rlndor special charter passed in 1853
hlr. sca1nmon Was ono Of tho original incorpora-
tors; was always elected n Director; had always
been member Of tho Finance or Investment
Committee; WAS President at ono timo; WAS
chosen Treasurer ut tho Inst two annual oloc-
tiouS; WaB tho largest Rtockl!oldor at nll times;
tho principal promoter Of the Company and
the most potent in tho management Of its
affaira. Tho capital asock was 100000, 10 per
emit Of which waa paid in at first. Mr. Scam
mon claims TINT lo had Il contract to take this
sum Of 100000 Of paid-up capital on call and pay
1o per cont interest OH 1t, ps long
as ho should retain it. Tho ovilonco si,,-
ply showa that Mr. Scammon mado an oiror to
pay 10 per cent interest OIL tho fund until bot
ter Investment could DO found. 1lia oireruoror
camo boforo The Board of Directors Us proposi-
ton. md was mover voted upon. Mr. Scammon
kept tho fund, as all lilo stockholders had paid
III their 10 por cont to him. 1t tho eud Of tho
year ho paid 10 por cent interest on it, mud this
was indoreed on tho utock notes Of tho stock
holders. For Homo time after, tho affairs Of tho
Company wero not prosperous, and this
original fund Of $4,000 WIS exhausted by
lis loaaeB to within 81 900 Of tho ontiro amount.
Then, in 1868, call NuB mndo on tho stock notes,
and tho money which was received was deposited
In tho Mechanics National Dank, a,,a there
passed TO l1r. sca1nmons credit, ho using It as
Ills own. Tho manner Of keeping tho Mutual
Security Companys books was to charge all
moneys received to tho Treasurer, ard crotlit him
with whatever monoy was puil out for losses,
oxponeos, or Investments. No credit appoars
upon this account Of any money loaned on call
to ]. Y. scan,mon. This WAS tho history of tho
Company prior to ia bankruptcy, as shown by
tho evidence. Mr. Scarnuon was Treasurer OF
tho Company at the dato Of bankruptcy, and tho
bookH Of tho Company had him charged, aa
TreaGuror, with 500, 1s0. NcesrH Williams md
Thompson then proceed to mako The following
points i'll law:
!. Tho oyidcnco Of tho arrangement
clnimoa by Mr. 6camlnon did not establish a
contract for Il loan. Directors, when aysou,-
hlod, must act as body, and conyorsation
among tho,n is no oydonco Of tlloir action: tho
record il Tho Iost ovidcnco. Tho ofror to taLo
money at certain ratio Of interest, assontod to
by como Directors who may llayo heard it, cali
not eonatitnto contract for d loan Tho owl
donco 1ajla to show that 4 aIority of tho Di-
rectorh aueontod, oyon III MI Informal way
There was 10 opportunity to dlHHont as body
Tho Directors never had any authority conferred
upon thon to net for tho Company in tioir illli-
vid"al capaclty. Therefore, tLoro noyor waa o
contract. auol III 6cannon claims.
2. by tho clartcr Of tho Company, i!s capital
stock cannot ho loaned except upon security.
No security was glyon In this caao and tho
alleged contract ia therefore, forbidden BY law,
alhl void. Tho Object OF tho prohibition WAS
evidently to restrict tho power OF lilo Directors
iu investing tho cnnita! stock. Whom Dlrou-
tor, lion, takos n'onoy belonging to tho Com
la'y, without complying With tho requirements
of tho cI.cltor with whch lo nuatba presumed