USA > Indiana > Whitley County > History of Whitley County, Indiana > Part 28
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ever sustained occurred in March, 1895, when without warning the senior member, E. L. McLallen, Ist, while apparently in perfect health, was stricken with apoplexy and fell dead at the door of his private con- sultation room in the rear of the offices. His sudden death was an inestimable loss to the institution which he had helped found and to the community as well. In the summer of that year H. De Witt McLallen became an active member of the firm.
For three generations or more the Mc- Lallens have been bankers in a true commer- cial sense, having controlled large financial transactions for themselves, and they have ever been a class of men to whom the less successful could appeal for financial guid- ance. Perhaps the business sagacity and the progressive spirit of the operators of this bank has in no instance been more in evidence than in a change of their affairs somewhat recently made. Aware of the un- stable character of a private bank, uncon- trolled by any state or federal authority, the firm decided to "nationalize" the insti- tution, which was accordingly done Feb- ruary 2, 1904, when the Farmres' Bank was reorganized and chartered as "the First National Bank." of Columbia City, under No. 7132. It has a capital stock of $50,000, all fully paid, which is all held by the Mc- Lallens except an allotment which was fit- tingly apportioned at this time to Thomas L. Hildebrand, who has been identified with this bank for over seventeen years and who on the above date was made assistant cash- ier. The business proportions of this bank can be well adjudged from an examination of its last current statement, which was issued at the close of its business hours on
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WHITLEY COUNTY, INDIANA.
January 29, 1907, which statement we here- called South Whitley. John Arnold located with append :
Resources.
Loans and discounts $258,208.89
U. S. bonds for circulation 50,000.00
Other bonds 51,842.60
Real estate, furniture and fix-
tures 15,000.00
Cash on hand and in banks. 165,198.20
$540,249.69
Liabilities.
Capital stock. $ 50,000.00
Surplus and undivided profits. .
7,077.94
Circulation
50,000.00
Deposits
433,171.75
$540,249.69
The officers of this bank are as follows : Henry McLallen, president ; E. L. McLallen, vice-president ; H. De Witt McLallen, vice- president ; Walter F. McLallen, cashier; Thomas F. Hildebrand, assistant cashier.
THE SOUTH WHITLEY BANK, JOHN ARNOLD & CO.
The next and third bank organized within the limits of the county was that of the bank at South whitley known under its firm name of John Arnold & Co.
For many years one of the leading fam- ilies of South Whitley was that of the Ar- nolds. They came to the county with other pioneers and various members of the family located at different parts of the country in and about the village of Springfield. now
upon a tract of land lying on the south bank of Eel river about four miles east of South Whitley, which had been given to him by his father.
One of the most essential needs of the early pioneer was that of a grist mill and accordingly the citizens of Springfield early in the spring of 1851 started a subscription for the purpose of raising a fund to induce some one to undertake the establishment of a flouring mill on the river at that place. True to their former progressive business instincts, John Arnold and some of his brothers looked upon the proposition with favor, and as an outgrowth of their discus- sion they erected a saw mill during the year of 1852.
This venture was fraught with such mar- velous results and was productive of such indispensable utility to the settlers of the surrounding country that the flouring mill proposition was undertaken the following year and culminated in the erection of a mill on the present site of the mill now owned and operated by the South Whitley Mili Company. In conjunction with the two enterprises mentioned the Arnolds erected a fine one-story brick business house at the northeast corner of Front and State streets in the village and from it commenced the retail mercantile business.
The country store flourished under their careful management like their previous ven- tures, until it soon became apparent that greater facilities were extremely necessary for the adequate handling of their commer- cial interests and accordingly John Arnold and his brother Jesse founded a private bank at North Manchester in the summer of
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WHITLEY COUNTY, INDIANA.
1871. For seven years this bank was suc- cessfully operated in connection with their business interests at South Whitley, until some of the younger members of the family had been admitted to the various interests involved in their operations and a second private bank was organized and opened its doors for business in a fine two-story brick building built for that purpose and located on the southeast corner of Front and State streets, just opposite the Arnold store.
This bank was not organized under the law, but was a private or partnership bank, the partners being John Arnold, of South Whitley, and Jesse Arnold, of North Man- chester.
This bank enjoyed the confidence of the people of the community from the start and had become an important factor in the commercial interests of South Whitley.
About the time this bank was organized, or in 1878, the Arnolds divided their busi- ness interests and the bank at North Man- chester was made a national bank, with Jesse Arnold as its president, and the bank at South Whitley was managed directly by John Arnold, who pursued the best plans known by him to build up a banking business on lines to maintain the confidence of the patrons of his concern.
In October, 1880, he was stricken with a fever, resulting in his death after a brief illness. His death was a great shock to the community. The people had learned to know him as a kind hearted, benevolent citi- zen and the rectitude of his conduct had merited him an everlasting remembrance by the people of South Whitley. During the quarter of a century of an active business career John Arnold had accumulated consid-
erable property, both personal and real, and by the terms of his last will and testament his possessions were placed under the con- trol of his wife, and his son James was called home from college to assist in the ac- tive management of the business. After a few years some changes were made and the bank was thereafter operated under the name of James Arnold and Company, and was known as the South Whitley Bank, but for convenience of management the records of the bank named James Arnold as presi- dent. Jesse Arnold, vice-president, and Thompson Arnold as cashier. The last named was a son of Jesse Arnold and was practicing law at Marion, Indiana, but gave up his practice to take a position in the bank at South Whitley. For ten years or more James had direct charge not only of the bank, but led in the business operations of the flouring mill, besides the handling of a large elevator, which had been erected by the Arnolds in conjunction with the mill. Besides the foregoing busi- ness enterprises, James became interested in some personal affairs and formed a part- nership with Simeon Huffman in the lumber business and operated this business from Grassy creek. Fulton county, under the firm name of Arnold & Huffman. In 1887, he was elected township trustee of Cleveland township which greatly increased his under- takings and responsibilities. During his term of office he built the magnificent public school building now owned by the corpora- tion of South Whitley in which the public schools are now conducted. During the summer of 1893 large amounts of grain were bought and shipped by the Arnold Mill Company and many bushels were placed in
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WHITLEY COUNTY, INDIANA.
storage in the mill and elevators owned and operated by the Arnolds, all of which neces- sarily required large sums of money. So great indeed were the needs of the bank for ready money that their deposit with their correspondent in New York and Chicago had ebbed to such a low tide that in June two drafts drawn on their Chicago account went to protest. This unfortunate and most disastrous occurrence soon became known among the local bankers of the country and ultimately came to public notice which was the direct cause of heavy withdrawals from the bank and a run on the institution was averted only by the assurance of the Arnolds that they were amply able to meet any de- mand made upon them, and that they had three dollars' worth of assets to every dollar of liability, and by the further action of a large number of responsible citizens signing an article of agreement binding themselves to discharge any obligation of the bank that might not be liquidated by it on demand. (This agreement was soon afterward rescinded. )
The action of the citizens of the town in coming to the aid of the bank in June. in a measure quieted the apprehensions of depositors, but there continued to be a quiet withdrawal of deposits, until October fol- lowing, when it became apparent that their little financial craft had drifted so far from the moorings of the founders, that a return to the golden haven of splendor and plenty was but a dream of idle hope and on the third day of October, 1893, James Arnold went to Columbia City and made a full statement of the bank's condition to his attorney. A. A. Adams, still insisting that the bank was solvent. It was the judg-
ment of the attorney that for the protection of creditors a receiver should be appointed without delay, and accordingly the case of Jesse Arnold vs. James Arnold, for the ap- pointment of receiver, was filed and the papers were taken the same day by Mr. Adams to Albion and presented to Hon. Jo- seph W. Adair, judge of the thirty-third judicial circuit, who was holding court at that time in Noble county. James Arnold, the defendant, was present in court, admitted the truth of the facts set out in the com- plaint and consented 'to the appointment of a receiver. William B. Fox, of South Whitley, was named as receiver and took charge of the bank on the morning of Octo- ber 4. 1893. after giving the required bond. Ford Grimes and Francis B. Moe were ap- pointed appraisers and spent more than a week in listing the assets and liabilities of the bank. The assets consisted of three hitin- dred and nine items of personal property, real estate, notes, mortgages, overdrafts and other claims, amounting in all to eighty-two thousand eight hundred thirty-five dollars and forty-five cents face value. Such a large part of the listed assets were consid- ered worthless that the appraisers valued the same at nineteen thousand five hundred twenty-eight dollars and sixty cents.
The liabilities scheduled embraced six hundred and thirty-eight items, aggregating the sum of one hundred and thirteen thou- sand seven hundred fifty-nine dollars and fourteen cents, showing an excess of liabil- ities over assets of thirty thousand nine hundred twenty-three dollars and sixty-nine cents, as listed and an excess of ninety-four thousand two hundred thirty dollars and fifty-four cents as appraised. On the 13th of
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WHITLEY COUNTY, INDIANA.
November, 1893, Mr. Fox resigned as re- astrous failure was the sale of the remain- ceiver, and Martin L. Galbreath was named by the court as his successor and Hon. A. A. Adams was retained as council for the new receiver. No sooner was the task of administering said trust commenced than it appeared that the appraisement was even too high and that the inventory was inaccu- rate. Notes considered good were found to be copies, the originals being hypothecated to secure loans or depositors. More than four thousand dollars of good notes held by the bank were for advances made to farmers, who had wheat deposited in storage with the Arnold Mill Company, also in the hands of a receiver and held by the bank as security to such advances, were offset by wheat re- ceipts after a test case had been brought on one of such notes, and the court holding that all of the notes marked "secured by wheat in mill" could be paid by tendering to the receiver wheat checks amounting to the value of such notes, allowing fifty-six cents per bushel for the wheat, which was selling for that price upon the day the bank failed, and consequently by this decision the available assets of the bank fell off over four thousand dollars and the resources of the mill company were correspondingly in- creased. It also developed that collections had been made for local and foreign houses, and remittances delayed. In a case brought to determine the standing of such claimants, it was held by the court that all such col- lections constituted a trust fund, and the claimants were preferred creditors. This further depleted the small cash balance with the receiver, and in the end, there was noth- ing for the regular depositor.
An event in the settlement of this dis-
ing securities at public auction, by order of court, at the office of the receiver in South Whitley, which occurred on Wednes- day, January 30, 1895. This was an event- ful day in the history of the Arnold bank. David L. Shinneman was the auctioner. This day of all others was one of universal sympathy among the victims of this ill- fated bank. No strangers sought to profit by the losses of those now in distress and the bidders were simply left alone to pur- chase their own obligation if they so de- sired. One judgment of three hundred dol- lars was sold for twenty dollars. Another of nearly four hundred dollars went for thirty dollars. The overdraft of James Arnold, the president of the bank, of four thousand four hundred sixteen dollars and twenty-eight cents and appraised at seven hundred dollars was knocked down for the frightful pittance of twenty-five cents, and was regarded upon that day as going at a premium. The overwdraft of the First Na- tional Bank of Huntington which had been appraised at two thousand three hundred fifteen dollars and seventy-eight cents was shown to be a false entry on the books and subsequent developments showed that in fact James Arnold owed the said bank near- ly twelve thousand dollars. The overdraft charged against J. L. Snell, of Sidney, amounting to four thousand fifty-one dol- lars and appraised at two thousand dollars was more than offset by wheat receipts, com- missions for services and other items of indebtedness. Snell was the Arnold agent conducting a grain business for them at Sid- ney, a little town over in Kosciusko county.
The unsecured notes of James Arnold
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WHITLEY COUNTY, INDIANA.
amounting to seventeen thousand five hun- dred dollars sold for sixteen dollars and fifty cents. Thompson Arnold, the cashier. had an obligation to the bank as shown by the books of nine thousand, three hundred dollars which was sold for fifty-nine dollars and twenty-five cents.
The above are but few of the more im- portant items constituting the remnant sale of the once flourishing banking house of James Arnold & Company. The items sold in this sale had a face value of forty- three thousand seven hundred three dol- lars and forty-two cents and they yielded to the creditors the paltry sum of two hun- dred thirty dollars and eight cents. The bank building and office fixtures were sold to Jerry F. Schell, as the agent of Andrew Shorb, for three thousand dollars, and final- ly came into the possession of F. H. Foust, I. B. Rush and F. S. Remington, consti- tuting the firm of Foust, Remington & Company.
THE ARNOLD CRIMINAL TRIALS.
The legislature of 1891 enacted a law making it a felony for bankers to receive deposits after insolvency. Probably the first case tried under this law. and certainly the first case reaching the supreme court of the state, grew out of the failure of the Sonth Whitley Bank.
Soon after the truth about the real con- ‹lition of the Arnold bank became known. there were rumors of criminal proceedings being instituted, and during the last week of the year 1893. upon an affidavit made in Huntington county, a warrant was issued for the arrest of James Arnold, but was
never served. as the friends of Arnold had advised him of the action taken, and he hurriedly left the state and has never returned.
The grand jury called at the February, 1894, term of the Whitley circuit court, re- turned a large number of indictments against James Arnold, Jesse Arnold and Thompson Arnold. A number of these indictments were for receiving deposits after they knew the bank to be insolvent. Lorenzo D. Flem- ing. of Ligonier, was prosecuting attorney and appeared for the state, assisted by Thomas R. Marshall, as special counsel em- ployed by the county to prosecute the Arnold cases. Mr. Marshall retired from the case near the end of the trial owing to the serious illness of his mother, who never recovered, and his law partner, P. H. Clugston, con- cluded the prosecution and made one of the best efforts of his life.
For Jesse and Thompson Arnold, H. S. Biggs and L. W. Royse, of Warsaw, and A. A. Adams, of Columbia City, appeared. The attorneys for the Arnolds filed a mo- tion to quash the indictments for receiving deposits after insolvency. upon the ground that the act of 1891 was unconstitutional by reason of an incomplete title. Judge Van Fleet. of Elkhart, was called to hear the motion and after hearing extended argu- ments, sustained the motion and quashed the indictments. The state took an appeal to the supreme court, where the case became a celebrated one. and was finally reversed, the constitutionality of the act being upheld.
Jesse Arnold, while included in the in- dictments was never molested in any way. on acocunt of his age and a very general feel- ing that he had no guilty knowledge of the
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WHITLEY COUNTY, INDIANA.
management of the South Whitley Bank. Thompson Arnold was by the same grand jury indicted for conspiring with James and Jesse to fraudulently procure from "divers citizens of Whitley county" money to be deposited in the bank, by making false rep- resentations as to the solvency of the same. He was tried at the November. 1894. term of the Whitley circuit court and on the 5th day of December. 1894. was found guilty by a jury, who assessed his punishment at one year in the state prison and that he pay a fine of twenty-five dollars. The attorneys for Arnold presented a number of dilatory motions all directed to the proposition that the jury had made his term of imprisonment one year when the minimum provided by law was two years. The result was, after much argument, that the court. Judge Wil- liam L. Penfield. declined to pronounce sen- tence on the verdict of the jury except as the same related to the fine. He held that the verdict imposing imprisonment for one year was void. but that part impos- ing the fine was regular and therefore the verdict must stand as to the fine. Again the state appealed to the supreme court and again the ruling of the trial court was re- versed, and Thompson Arnold was then sentenced to serve one year in the state's prison.
The Whitley circuit court has probably never known a case which excited such pop- ular interest and was conducted throughout with such skill. as the case against Thomp- son Arnold. After the expiration of his term of imprisonment. Arnold returned to North Manchester, where he re-entered the practice of law until his death which oc- curred April 3. 1903.
THE BANK OF CHURUBUSCO.
Early in the summer of 1888 a well dressed gentleman made his appearance in Churubusco and it was soon learned that it was a well educated and wealthy mute looking for a location for the establishment of a bank. Meeting with encouragement he returned to his home at Sturgis, Michi- gan. and arranged his business affairs, re- turning to Churubusco in the course of ten days he established the first bank of the town in a little wooden building on the present site of the meat market of Emerick & Madden. This little private bank had a capital of $10,000,00 and did a nice busi- ness, being managed by Mr. Thomas Beals. cashier. A fire broke out in the town one day and Mr. Beals over-exerted himself in an effort with other citizens to extinguish it. and resulted in a severe case of pneumonia. from which he died. After this occurrence the affairs of the bank were closed out and the business was suspended.
Churubusco now fell a victim of the no- torious Zimri Dwiggins, of Rensselaer, In- diana, who formed a chain of banks all over the country and drained them into his Columbia National Bank, established in Chi- cago for the purpose. Dwiggins was the clev- erest captain of high finance who ever oper- ated in the country. What happened at 'Busco was enacted at a large number of oth- er places in the country.
He comes with a little safe, a little furni- ture and a few books, rents a building and calls it a bank. In it may or may not be ten dollars or a hundred. It isn't business particularly he is looking for, as he couldn't attend to it if he had it. It's confidence he
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WHITLEY COUNTY, INDIANA.
is looking for. He installs a bland, modest, in fact, delightful gentleman who is faithful in his attendance a Sunday-school and pub- lic worship and sits idle the entire week. Finally the citizens begin remarking what a very nice man he is and once in a while some one buys a draft for a dollar and a quarter and another deposits fifty cents to the account of his little boy. Finally Dwig- gins comes and calls on the people, attends Sunday-school one Sabbath and remarks how much better he is doing than he ex- pected, when everybody knows that he knows he hasn't made a cent, but the leaven is working and he is making- headway. So matters go along until the bank actually does a little business, but the profits from it for a month would not buy a breakfast for the manager. Dwiggins comes again, more pleased than ever with the business he is getting and is now ready to begin opera- tions. He suggests that while he is doing well he proposes to organize a bank under the state laws and give the offices to the citizen stockholders. In fact, put the man- agement all in their hands.
Many whom he approached did not have a thousand or two idle, or at least to spare. Why bless you it isn't their money he wants doesn't need it. has plenty to run the bank but wants influence. Just draw your note to the bank, deposit it and in a year or two the profits will pay it and you will be a banker-free. Admirable scheme. The bank is organized, directors, president, vice- presidents and all are citizens who give the bank credit and standing-but Dwiggins' man still handles the money. The bank now begins to do business in earnest. Officers and stockholders are responsible and they and their friends soon see deposits running
into the thousands. The same is going on at many other points. The morning papers announce the closing of the Columbia Na- tional at Chicago and our friend who wields the cash at Churubusco with tearful eyes tells that nearly all the local bank's cash is up there and if it is true he is ruined, as everything he hás in the world is invested here. He calls a meeting of the panic- stricken depositors and stockholders and tries to explain why all the bank's cash is up there. Thie upshot is that he and a kindly. benevolent old gentleman are sent up to Chicago to investigate. They are met by Dwiggins and wined and dined and it was fully explained that the Columbia National's troubles were but temporary and it would resume in a few days.
The committee returned fully satisfied and seemed to satisfy others. More money was raised to put the local bank on its feet. but somehow things did not work right, except that more money went mysteriously to Chicago or elsewhere and one morning the cashier was as if the earth had swallowed hin1.
Stockholders who paid in a thousand were liabletothe depositors for another thou- sand under the double liability law and like- wise those who had deposited a note for a thousand must pay it two fold. The de- positors thus got their money and the stock- holders held the sack. The Columbia Na- tional did not open again.
Among the assets of the bank was the note of Tra J. Chase. Governor of Indiana. for fifteen hundred dollars. This was the preacher governor-of course. he never paid it nor did he or Dwiggins land in the peni- tentiary.
The fixtures and remnants of the bank
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WHITLEY COUNTY, INDIANA.
were bought by Oscar Gandy, who estab-
lished the bank he still runs at the place.
0. GANDY & COMPANY BANK, SOUTH WHIT- LEY.
In March, 1894, following the Arnold failure, O. Gandy, of Churubusco, and Theo- dore Mayer, of South Whitley, rented the Arnold bank building with its fixtures and started a private bank. The firm occupied this building until it was sold, at which time they rented the Johnson building on the west side of State street, now occupied by the Eastom restaurant. This room was re- arranged and new and complete furniture and fixtures added. These quarters were occupied until 1898, when the bank was moved into the Edwards building at the cor- ner of State and Mulberry streets, where it is now located. This bank has been a pro- gressive institution and has taken on many side lines, among which is the flouring mills at Collamer, the grain elevators located on the Nickel Plate tracks, besides handling real estate and vehicles of various kinds. This bank was reorganized in 1905 and is now operating under the laws of Indiana as a state bank under the name of "The Gandy State Bank."
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