The Fall of the Banking House of
Annan-Horner
Michael Hillman
The
end of 19th and the beginning of the
20th century marked the most
promising and prosperous period in
Emmitsburg's history. This high
watermark owes its thanks in many
ways to two families: the Annans and
the Horners, whose names and good
work have all but been forgotten.
In 1882, Andrew Annan, with his sons
Isaac S. Annan, James C. Annan and
son-in-law, Major 0. A. Horner,
organized the Annan-Horner Bank. For
40 years, through diligent loans and
investments, the bank brought
prosperity to the community. Sadly,
these great families lost
everything, including their
reputations, following the collapse
of their banking house in 1922.
To fully understand the impact of
the fall of the Annan-Horner Bank
banking house on those individuals
and the community at large we must
first step back in time and briefly
trace the roots and accomplishments
of these two great families.
The Annan Family
Robert Annan, the great-grandfather
of Andrew Annan and the founder of
the banking house of Annan & Horner,
was born in Scotland in 1742. He
studied theology at the University
of St. Andrew under Alexander
Moncrief, one of the original
founders of the
Presbyterian Church.
Licensed by the Associate Presbytery
when only nineteen years old, Robert
migrated to New York in the summer
of 1761 where he remained for
nineteen years having four
congregations under his charge.
In 1764, Robert married Margaret
Cochran, daughter of William
Cochran. In 1762, William Cochran
purchased the western and northern
portions of Carrollsburg, an area
which now encompasses most of the
land west of Track Road up and north
to Fairfield, Pa. (In 1754, Samuel
Emmit had purchased the smaller
eastern part of this tract).
Margaret Cochran bore Rev. Annan two
sons: Robert II and William, both of
whom became physicians.
Robert was a firm believer in the
colonial cause. According to family
legend, he was known far and wide
for his frequent and colorful
denunciations of the British
Government. He was often visited by
Washington, Hamilton and Lafayette.
One can only wonder what might have
been said as these great figures sat
and talked of the events shaping
their world.
Robert Annan II was a graduate of
Brown University. Following
graduation, he studied medicine
under Dr. Rush of Philadelphia, the
foremost doctor of the time. Upon
his death Robert's grandfather,
William Cochran, passed his Tom's
Creek Hundred Estate on to Margaret
and her sister. The estate
eventually came into the hands of
Robert via Margaret, whence it
became know as the Annan Homestead.
Upon completing his studies, Robert
established his practice in
Emmitsburg, where he met his wife
Mary Cochran. Mary and Robert II had
11 children. The youngest, Andrew,
was born in the Annan homestead in
1805.
[Historical Note: Like his neighbor,
William Emmit, Robert tried his hand
at "town farming"-Robert's town,
called Annandale, was laid out
west-south-west of of William
Emmit's new town-"Emmitsburg"-half
way toward present day Mount St.
Mary's University. While Robert was
able to sell some lots in Annandale,
he was unable to repeat William
Emmit's success and eventually gave
up on the idea. The area where he
had hoped to build his town,
however, still bares the name
Annandale, as does the present day
road that skirts its western
boundary.]
We
know very little about Andrew Annan
other than that he followed the
footsteps of his father and became a
physician. In ____ he married Anna
Motter, with whom he had six
children: Robert L., David, Isaac
S., Andrew A., James Cochran and
Anna Elizabeth.
Robert L. Annan
was born on February 22, 1831. In
1849, he entered Washington and
Jefferson College. Upon graduation,
he studied medicine at the
University of the City of New York.
In 1855, he returned to Emmitsburg
and joined his father's practice.
For the next fifty-two years, he
served the Emmitsburg Community.
Concerned with the welfare of the
community at large, Dr. Annan was
often sought out for his advice and,
because of his education, was made a
trustee of the public schools. In
1869, he married Alice Columbia
Motter, the daughter of Mr. Lewis
Motter. Following her death in 1878,
he married Miss Hessie Birnie.
Between the two, he raised eight
children.
Isaac S. Annan was educated in the public
schools of Emmitsburg. When
twenty-years-old, he became a clerk
in the general dry goods store of
George W. Rowe. Following Rowe's
retirement in 1856, Isaac became the
store's proprietor and changed its
name to I. S. Annan & Company.
In 1858, Isaac's brother James
joined the firm. The store became
known as I. S. Annan & Brother. In
1880, having profited handsomely
from the store, Isaac turned the
day-to-day operations of the store
over to his brother James. Free of
the duties of maintaining the store,
he turned his attention to one of
the most pressing needs of the
community: clean drinking water. In
1880, Isaac, organized the
Emmitsburg Water Company.
James Cochran Annan, was born in
1836. He was the junior member of
the firm of I. S. Annan & Brother.
Like his brothers, he was active
member of the Emmitsburg
Presbyterian Church. For thirty
years, he was superintendent of the
Presbyterian Sunday School and along
with his brother Robert, one of the
Church's trustees.
In ____ James married Rosa J.
Stewart, a member of an old and
well-known Scottish-Irish family of
the Cumberland Valley, Pa. Rosa and
James had _____ children: the _____
James Stewart, was born in _______
Anna Elizabeth, the youngest child
of Andrew and Anna Annan, was born
_________. In 1878, Anne married
Oliver Horner, with whom she had ___
children. Andrew Annan Horner, the
_______, was born _____.
The Horner Family
As in the Annan Family, the roots of
the Horner family can be traced to
the original settlement of the area.
In 1753, John and Mary Williams
joined the growing community of what
was then called the Tom's Creek
Hundred. With the help of their
son-in-law, William Shields, John
and Mary acquired one of the finer
tracts of land in the area, Wilson's
Fancy. Wilson's Fancy now
encompasses Emmit Gardens and Silo
Hill. [First
settled in 1733 by John and Mary
Wilson, Wilson's Fancy was the very
first homestead in what would later
become know at the Tom's Creek
Hundred area.]
After his death in 1756, John
Williams deeded the land to his
three youngest children: Eleanor,
Ester and Henry. Over the ensuing
years Henry acquired his sisters'
shares and in the early 1800's
renamed the combined properties
"Fort Henry."
With the onset of the Revolutionary
war, Henry, then 33, was elected
second lieutenant of the
Game Cock
Company, one of the two
companies raised in immediate area,
both of which belonged to a regiment
commonly referred to as "The
Flying Camp Battalion"
Henry's company was commanded by his
neighbor, Capt. William Blair.
Henry's brother-in-law, William
Shields, commanded the second
company.
When Capt. Blair was wounded at the
battle of Brooklyn Heights,
Henry
assumed command of the "Game Cock"
company. Under Henry's
command,
the
company participated in many
hard-fought battles and,
because of this, they drew the
attention of George Washington and
the admiration of Gen. Lafayette, to
whom they reported during the final
assault on the siege of Yorktown.
When the war was over, Henry
returned to Emmitsburg and turned
his attention to his farm and
community affairs. In _____, Henry
oversaw the building of the bridge
over the Monocacy between Taneytown
and
William Emmit's new town of
Emmitsburg. Henry also
severed as local Justice of the
Peace, and many deeds of this period
bear his name.
In 18___, Henry married Jane
Witherow Cooper. Henry and Jane had
one son, _______, who showed little
interest in farming the Fort Henry
estate. Instead, he presided over a
business career in Frederick, were
he quickly rose to prominence.
When the war was over Henry returned
to Emmitsburg and turned his
attention to his farm and community
affairs.
Jane's sister, Sara, married
Alexander Love Horner II, whose
parents had settled on a farm just
across the Pennsylvania-Maryland
line. Sara and Alexander had four
children: George, Mary, David and,
in 1817, their last child, Alexander
L. Horner III.
In 1825, Sara Horner died, followed
six year later by her husband,
Alexander. After, the death of their
father, the Horner children went to
live on the great Fort Henry estate
of their now-widowed Aunt Jane. In
1853, a year before her death,
Jane sold Fort Henry to
her youngest nephew, Alexander.
Following the outbreak of the Civil
War, Alexander's nephew,
Oliver enlisted as a
private in Company C of Cole's
Maryland Cavalry. Following the
resignation in 1862 of his cousin
John Horner, Oliver assumed the
leadership of the Calvary Company.
Under Oliver's leadership the
exploits of the mostly Emmitsburg-staffed company became legendary.
Promoted repeatedly for efficiency,
bravery and meritorious conduct, he
ended the war with the rank of Major
and joined Henry Williams in the
ranks of true American heroes who
proudly called Emmitsburg home.
Just like his great uncle Henry
Williams before him, following the
war, Oliver returned to Emmitsburg,
Md., where he engaged in various
mercantile pursuits. He was
appointed Emmitsburg's postmaster in
1869. He resigned that position in
1877 to become United States
storekeeper of customs in Baltimore.
A post he held until 1882.
In 1878, Oliver Horner married Anna
E. Annan, the daughter of Anna and
Andrew Annan. In 1882, he returned
to Emmitsburg and was immediately
elected president of the Emmitsburg
Board of Commissioners. It was under
his tenure that the new Frederick
County Board of Health first raised
concerns over the quality of
drinking water available to the
residents of the town. As President
of town's Commissioner, Oliver
facilitated the town's ceding of a
right of way for the laying of water
pipes to the new Emmitsburg Water
Company that his brother-in-law,
Isaac Annan, owned.
The Formation of the Banking
House of Annan & Horner
In 1882, Andrew Annan, with his sons
Isaac S. Annan, James C. Annan, and
son-in-law, Oliver Horner, organized
the Annan & Homer bank. I. S. Annan
served as president; Oliver Horner
served as cashier.
In 1883, Isaac's son Edgar joined
the new banking firm. Born on July
4, 1865, Edgar was educated at New
Windsor, Md. In 1883, Edger gave up
his studies and began work at the
bank. Following the death of in 1897
of Oliver Horner, Andrew became the
bank's cashier.
In 1902, five years after Oliver
Horner's death, his son, Andrew
Annan Horner, succeeded to his
father's interest in the banking
firm. Born in March 1881, Andrew
Annan Horner attended public grammar
school and the High School of
Emmitsburg. Unlike his cousin Edger,
Andrew completed his education at
Eastman's Business College at
Poughkeepsie, Ny., where he majored
in banking.
In 1909, Andrew married Helen Bruce
Morrison, daughter of William and
Helen (Agnew) Morrison, of
Emmitsburg, Md.
[Historical Note: William Morrison
was the son of Emmitsburg's
wealthiest landholder, David
Morrison, who was married to a
sister of Robert Morris, the
financier of the American War of
Independence.]
In
_______,
James Stewart Annan, the
_____ son of James Cochran and Rosa
Annan, joined the banking firm. Know
as J. Stewart Annan, he attended New
Windsor College, the Chambersburg
Academy, in Chambersburg, Pa., and
Lafayette College, Easton, Pa. Upon
the completion of his education, J.
Stewart returned home, and engaged
in various occupations, including
the management of his farms that
totaled over 700 acres.
In addition to being on the board of
the Bank, J. Stewart Annan was also
a director in the People's Fire
Insurance Company of Frederick
County, the Emmitsburg Water
Company, the Emmitsburg and
Frederick Turnpike Company, and in
1907, he was elected to the office
of Commissioner of Frederick County
for a four-year term. He was
re-elected for a second term in
1911.
In 1896 J. Stewart Annan married his
cousin Andrew's wife's sister,
Elizabeth Morrison.
Shortly after
their marriage, the pair purchased
the old Horner home place, ‘Fort
Henry.'
A
wealthy man, Stewart Annan had the
means to turn Fort Henry's "Mansion
House" into a true mansion. In the
Victorian style of the time, he
added an eye-catching turret with
curved windows and steep-like roof.
He added a formal dining room on the
first floor and, adjoining it, he
included a butler's pantry. In 1897,
he added an entire rear wing. On the
east side of the rear addition, he
built first and second floor
porches. He also installed an oval
"Tiffany" stained glass window on
the second floor, also
characteristics of the Victorian
times.
J. Stewart and his wife Elizabeth
were the closest thing Emmitsburg
ever had to royalty. They lived
extravagant lives, funded by the
profits they received from all their
business investments. Elizabeth was
a frequent visitor to the most
prestigious stores in Baltimore and
the couple thought nothing of paying
more for a simple light fixture than
most residents in the town earned in
a year.
Under the tutelage of these three
men, the bank prospered. They loaned
liberally to friends and neighbors,
and reinvesting their profits back
into the community. In a short
matter of time, the Annans and
Horners became controlling
stockholders in the Emmitsburg Water
and Turnpike Companies and,
following the bankruptcy on the
Emmitsburg
Railroad in 1897, they
assumed a significant financial
holding in it as well. They also
invested heavily in local farms and
orchards. In ___, they purchased the
Blue Mountain Apple Orchard, which
held great promise of even more
profit.
World War I - Boom and Bust in
the American Farming Comminutes
When
the war in Europe began in 1914, the
United States was in a recession.
European need for goods such as food
and munitions helped end the recess
in and set the stage for a long
economic boom.
The destruction of European farms
benefited American farmers. Excited
by the rise in prices for food, they
borrowed heavily to buy more land
and expand production.
America's entry into the war in
April 1917 unleashed a torrent of
Federal spending, most of it funded
by Liberty War Bonds. The bonds were
denominated in small amounts, i.e.,
$100s and sold by investment
bankers. The small denominations
opened the floodgates to a whole new
group of investor, namely small
community banks like the Annan-Horner
Bank.
To ensure the Liberty-Bonds sold
well, the federal government
pressured the newly founded Federal
Reserve to keep its lending rates
low. Looking to cash in on the
higher returns on the Liberty Bonds,
many small banks, including the
Annan-Horner Bank, borrowed heavily
from larger banks and invested in
these bonds.
In addition, many of the bank
customers withdrew savings from
lower interest savings accounts and
purchased their own bonds. In
withdrawing their funds, the banks
customers had a significant impact
on the working capital of the bank.
As long as interest rates stayed
low, the boom in the high yield
Liberty Bond market remained strong.
When they needed to raise cash, the
Annan-Horner Bank found a ready
market for its Liberty Bond holding.
As such, liquidity was not an issue.
Unfortunately for the Annan-Horner
Bank, as well as other holders of
Liberty Bonds, the decision of the
Federal Reserves to hold interest
rates led to a rapid growth in the
money supply, setting off an
inflationary boom. Following the
cession of hostilities in Europe, to
address the inflationary spiral, the
newly established Federal Reserve
System set in motion drastic
deflationary steps.
The Fed's plan included the raising
of short-term interest rates and the
liquidation of the Liberty Bonds,
which would further reduce the money
supply. Raising interest rates,
however, dramatically affected the
value of the fixed-interest Liberty
Bond. As Interest rates rose, the
value of the bonds plummeted.
As the Federal Reserve began to
enact its second phase of its
deflationary plan, the calling in of
loans, banks like the Annan-Horner
Bank were forced to sell their
Liberty Bond holding at below face
value. Well-funded big estates and
banking institutions purchased the
depressed bonds by the hundreds of
millions with heavy losses to
innocent original purchasers.
As Interest rates continued to
increase, small banks and people who
had Liberty Bonds and were trying to
hold them were forced to sell them
at whatever they could get. Needless
to say, the decision of the central
bank had a chilling effect.
Adjustments throughout the economy
were sudden, erratic and severe. By
Dec 7, 1920, the value of Liberty
Bonds hit a record low.
While all Liberty bondholders
suffered, farmers were especially
hurt. Wartime demand for food and
agricultural raw materials had
increased the prices of farm
products. Higher prices had
stimulated farmers to borrow heavily
and invest in additional land and
equipment-most of this purchased on
easy credit that was meant to be
guaranteed by the rising farm
incomes.
Farms were the first thing to
recover in Europe following the end
of WWI and, with them, the need for
American food stocks evaporated
almost overnight. Shut out of the
European market, the domestic
oversupply of food stocks led to a
drastic fall in the prices of farm
products, which directly translated
into declines in farm income. The
fall in food prices undercut the
farmland prices and meant that many
farmers had difficulty paying
interest on their loans, leading to
a mortgage crisis in the farming
community.
Failures and foreclosures followed,
including many locally like the
Zacharias Family that lost their
farm
Single Delight, which had
been in the family since the first
European settlers stepped in the
area.
Already pressed by losses form
Liberty Bonds, many small banks in
farming communities were unable to
bear the brunt of this second blow
and failed. The Annan-Horner Bank
did not escape this fate, and
according to its own records was
insolvent at the close of 1920. The
bank 1920 statement, prepared by
Edger L. Annan, showed that the bank
had absorbed its capital and
surpluses of $20,000, and was
$40,000 short in accounts. As bad as
this might sound, this loss was only
a paper loss and would only become
actual if the bank was forced to
sell its liberty bonds at the
depressed prices.
Word of the condition of the Annan-Horner
Bank was kept closely guarded and
few knew of its dire straights. The
Annan-Horner Bank families placed
their hope in the return of the bond
market; the profitability of their
orchard and the water company
investments; and the continued
loyalty of their customers. These
were customers who, in spite of
declining farm incomes, had
heretofore not succumbed to
withdrawing their savings from the
bank. As long as depositors did not
need to withdraw their money, there
would be no need to cash in the
Liberty Bonds and the bank would
survive.
The Perfect Financial Storm
However, time and weather were not
on the bank's side. On April 1921,
two nights of freezing temperatures
destroyed 75% of the county fruit
crop. The cash crops many farmers
depended on to fund themselves until
the fall harvest were wiped out. The
entire cherry, peach, pear and plum
crop, along with most varieties of
apple were hit the hardest. The late
frost also killed the winter wheat
crop, which placed additional
financial burden on local farmers.
Robbed of their spring cash crops,
farmers began to withdraw savings to
cover operating costs. To cover
withdrawals, the bank was forced to
sell some of its Liberty Bonds at
the depressed prices, forcing it
deeper into a financial abyss.
To add insult to injury, the late
spring frost was followed by drought
that lasted well into August and was
described by many as the worst
drought ever experienced. In July,
the area received less then 1" of
rain versus its normal 6 inches. Hay
crops, a vital staple for livestock,
produced only stubble. By August,
the drought was being called the
worst in three years, and water use
restrictions were put into effect
throughout Frederick County.
To limit their losses, the bank
began to call in loans. In April,
the bank seized the property of a
Callahan. In 1917, the bank had
placed a lean on the property
following the failure of the Blue
Ribbon Egg Company, which Callahan
had funded with a loan from the
Annan-Horner Bank.
May 14, 1921, the property was
subsequently sold at the public
square in Emmitsburg. Andrew A.
Horner represented the bank and was
questioned as to the correctness of
the title, to which he replied was
good. Based upon this declaration,
Dr. Jamison, a prominent physician
in town, bought the property.
About the same time, in an attempt
to raise badly needed capital, Annan-Horner
Bank filed for a charter as a state
bank. It was to have a capital of
$50,000 with a surplus of $25k. The
money was to be raised by the
selling of stock at a subscription
price of $15, though the face value
of the stock was only $10 share. The
extra $5 was to be used to establish
a surplus fund.
Shares for the bank were heavily
marketed to the residents of
Emmitsburg. For many, this was the
first opportunity to hold a share in
a company. Many residents who bought
shares did so by paying for their
shares by drawing upon savings in
their savings accounts. In doing so,
they inadvertently helped convert a
significant portion of the bank's
outstanding debt. In this case, it
was money owned to its depositors to
shareholder equity.
Exchanging debt for equity is a
frequent strategy used in resolving
high profile bankruptcies today.
Creditors agree to trade what is
owed to them in exchange for shares
and, with them, control of the
company. As creditors have a higher
priority in receiving their money
than stockholders, if the
institution should fail, the
decisions to accept such a deal only
comes after extensive research into
the assests of the company and its
ability to survive in its restricted
form.
Whether the residents of the town
who traded their savings for stock
in the Annan-Horner Bank understood
the risk they were taking or not
will probably never be known.
However, it is reasonable to ask
whether they would have been so
willing to part with their
hard-earned savings had they known
the true status of the bank's
financial condition.
Unfortunately, since the
Emmitsburg Chronicle,
which had so effectively
chronologized the events of the
community for the past 32 years, had
ceased operation the year before,
the outcome of the stock offering
was unknown, as well as what
happened over the next two months.
It is only through later court
testimony and newspaper's reports
that we learn that the Annan-Horner
Bank suspended operations on August
24, 1921, and, on October 21, its
accounts were assumed by the
Farmer's State bank.
Did the bank openly fail or was it
simply taken over by the Farmers
State Bank, as that bank seized upon
the opportunity to establish a
presence in Emmitsburg? Several
clues point to the later. First,
Andrew Annan, the cashier for the
Annan-Horner bank, was retained as
the cashier for the new Farmers
State Bank. Had the bank openly
failed, it is doubtful they would
have retained him.
Second, the Annan-Horner Bank
continued to lend money. On November
21, a month after being "succeeded
by the Farmer's State Bank," the
bank, under the name Annan & Horner,
Inc., lent Albert Wetzel and his
wife $140. The note, payable in 90
days, was subsequently endorsed to
the Baltimore Commercial Bank as
collateral security for a larger
loan of several thousand dollars
from that bank to the Annan Horner
bank.
Lastly, less than a month after
ceasing operation, Mrs. Andrew A.
Annan, president of the Emmitsburg
Democratic Women's Club and wife of
__________ , was elected
representative to the Democratic
State Convention. Again, had the
bank openly failed, it would be
doubtful that it could have secured
such a victory with the losses
residents would have occurred.
The year 1922 brought no relief to
the Banks hard pressed farmer
customers. April, usually one of the
wettest months of the year, saw only
one inch of rain. Once again, a late
frost destroyed a considerable
portion of peach, apple, cherry and
pear crops (upon which the farmers
banked so heavily), as well as the
early vegetables in the gardens. In
increasing numbers, farmers had to
turn to savings to make ends meet.
The Collapse of the Banking House
of Annan-Horner Bank
Up until this time, the bank
suffered primarily from events
outside of its control, but, with
the finances becoming increasingly
tenuous, certain questionable
actions of the bank (whether
intentional or not) cast suspicion
on its veracity, setting the stage
for the collapse of the bank.
A few days before the 18th of
February, 1922, the Baltimore
Commercial Bank returned the Albert
Wetzel note to the Annan-Horner Bank
requesting that they substitute
other collateral in place of it. On
February 18, Albert Wetzel, as
required, went to the bank to repay
his note. After making the payment,
he was informed that the actual note
was temporarily missing, but "not to
worry, it would be found and
delivered to him."
Contrary to the bank's statement, a
few days after receiving Wetzel's
payment, the bank returned his note
to the Baltimore Commercial Bank,
falsely stating the note was
uncollected.
Several months later, the Baltimore
Commercial Bank sued Wetzel and wife
and obtained a judgment against them
for $140. While there is no record
of Mr. Wetzel's response upon
learning that a lean had been placed
against him, one can only assume
that word spread quickly through the
community.
Two months later, and before the
Baltimore Commercial Bank brought
suit against Wetzel, the Annan-Horner
Bank lent $3,000 to George Smith,
who pledged the $2,300 in his
savings account with the Annan-Horner
Bank as security collateral for the
loan. The loan was no sooner agreed
to when it was resold at a discount
to the Baltimore Commercial Bank-the
bankbook being delivered along with
the loan papers in the case that any
money be taken from the account.
When the note came due in June,
Smith offered to pay the balance due
on the note, $700, provided the
Annan-Horner Bank would accept his
deposit book with the bank at its
face value of $2,320 with accrued
interest. The offer was refused.
Smith was told that the note was in
the hands of the Baltimore
Commercial Bank and settlement would
have to be made with that bank. The
bank refused to allow him to
withdraw his savings without his
bankbook and, shortly thereafter, a
lean was placed against Smith for
the defaulted note.
Given these questionable events,
which had begun to weigh heavily
upon the public's belief in the
integrity of the bank, one can only
imagine what went through everyone
minds on May 6, 1922, when they
awoke to headlines in the Frederick
Post that the local Union Bridge
Bank, one similar to the Annan
Horner Bank, was short $150K.
For the next few weeks, newspaper
headlines blazed with allegations
that the cashier had managed to
cover the missing funds every time
the bank was examined. It was only
after his activities had raised
suspicion that the president of the
bank requested the investigation,
whereupon the deficiency in funds
was discovered.
In a futile and fatal last-ditch
effort to raise capital, on
September 22, the Emmitsburg Water
Company, which was controlled by the
Annan-Horner families, raised the
water rates. The public outcry
against the rate increase was swift
and severe. With it, any sympathy
for the plight of the two families
vanished.
Within days, a leading attorney in
town, Vincent Sebold, filed suit
against the rate increase with the
State Public Service Commission. The
petition was signed by 2/3 of water
users, as well as the non-family
member of the Water Company Board.
While the bank might have been able
to explain away the Smith and Wetzel
fiascos as mere oversights, when Dr.
Jamison found the property he had
purchased five years earlier from
the Annan-Horner Bank (which at the
time they claimed had a clear title)
was under threat of Sheriff sale,
the bank lost all credibility with
the citizens of the town.
Unbeknownst to Dr. Jamison and
contrary to public statements of the
bank at the time of the original
sheriff's sale, the title to the
property sold to Dr. Jamison was not
clear. The bank had a second lean on
the property. Several months after
winning this lean, the Annan, Horner
Co. sold it to the Farmer's and
Mechanics National Bank of Frederick
to secure a loan to them.
When it entered bankruptcy, the
Annan-Horner Bank ceased making
payments on the loan to the Farmer's
and Mechanics National Bank. In
response, the Farmers and Mechanics
National Bank directed that the
property be sold by the sheriff.
While Dr. Jamison managed to delay
the sale, the damage was done.
In November, Dr. Jamison filed a
petition with the circuit court
alleging that the bank had
liabilities in excess of assets in
excess of $110,000 and, as such, was
insolvent. A few days later, the
bank admitted the insolvency and
offered no objection to the
appointment of a receiver, which was
appointed on Dec 4th.
Three days later, a petition was
filed with in Federal court by the
attorneys for Albert Close, Mary
Martin and Ersa Six. The three
neighbors all had savings accounts
with the Annan Horner Bank. Like
Jamison's petition, their petition
alleged that the banking firm was
insolvent and that the bank had
committed an act of bankruptcy by
allowing a receiver to be appointed
to take charge of the property and
affects.
Upon reviewing their petition, the
judge issued an order giving the
Annan Horner bank until Dec 23rd to
reply or they would be adjudged on
involuntary bankrupts. Once judged
bankrupt, the case would be handed
over to Federal authorities, which
the depositors felt were better
qualified to handle the case than
the locally appointed receiver.
On December 11, four days after the
receiving the order from the Federal
court, Andrew A. Horner, cashier of
both the Annan-Horner and Farmer's
State Bank, submitted his
resignation.
The Dec 23rd deadline came and went
with no reply from the Annan Horner
Bank. As such, the Annan Horner Bank
was declared involuntarily bankrupt.
Ten days later, a fire destroyed the
barn at the bank's Blue Mountain
Orchard Company. Six horses, two
mules and 14 cows were lost with the
barn, together with a large quantity
of hay and feed and farming
equipment. The total loss of
livestock is estimated at $3,500,
hay and feed at $1,000, and farming
equipment at $800. Along with the
barn and its content went a silo and
a shed. The total loss is estimated
at upwards of $10,000.
According to Samuel Long, who
tenanted the farm, all was well when
he retired Sunday evening. When he
arose on Monday at 5 am, he heard
the crackle of flames and looked out
to see the barn a flaming mass. "The
entire upper part of the barn had
already caught fire." Whispers of
arson quickly spread through the
town.
On March 17, Arthur Willard, who had
been appointed by the Federal court
as bankruptcy referee, began his
public hearings. The object of the
hearings was to ascertain the assets
of the bank and individual members
of the firm. The trustees for the
creditors and depositors: State's
Attorney General Alexander
Armstrong, John S. Newman, and
Emmitsburg Lawyer Vincent Seabold
would turn the assets into cash for
the benefit of the creditors and its
300-400 depositors.
The bank's assets consisted mostly
of personal loans to local residents
and equity in real estate over and
above montages on dwellings in
Emmitsburg. In addition, the bank
claimed the 255-acre Blue Mountain
Apple Orchard to be worth $20,000 to
$25,000. However, against the
Orchard property were two montgages
equaling $40,000. One held by John
Hollinger for $15,000 and other by
the Baltimore Commercial Bank for
$25,000.
On April 27, Edgar L. Annan and
Annan Horner appeared as witnesses.
It was during this hearing that
residents of Emmitsburg first
learned that the bank was
technically insolvent as early as
1920, a full year after they had
been lulled into buying stock in it.
In his defense, all that Edgar Annan
could say was he thought the figures
wrong even though they were his
figures.
In their testimony, the cousins
claimed that poor investments,
mainly in the Blue Mountain Orchard,
a garage, and other investments,
especially Liberty Bonds, were
responsible for the condition of the
bank's finances.
At the resumption of the hearings
four days later, it was disclosed
that, before the finical conditions
of the bank had been made public,
Edgar Annan had sold his place of
home and place of business in
Emmitsburg for approximately $11,000
and had invested the proceedings in
the name of his wife and two
daughters. The trustee immediately
sized upon this revelation and
opened an investigation into the
transaction with the view of having
the proceedings declared a part of
the assets of the defunct bank.
In June, the bankruptcy referee
began to investigate the bank's
handling of transactions involving a
$900 loan to Francis S. K. Mathews
and another for $200 for Albert C.
Wetzel.
The bank had discounted the two
notes, bundled them along with other
notes and sent them on to the
Baltimore Commercial Bank as
collateral for a loan. When the
notes came due, they were sent to
the Farmers' State Bank in
Emmitsburg for collection. Upon
receipt of the notes, he notified
Matthews and the latter borrowed
$900 on a note from the Farmer's
State Bank and paid the Annan-Horner
note. Instead of turning this amount
over to the Baltimore Commercial
Bank, he credited the amount to the
Annan-Horner Bank.
Later, the Baltimore Commercial Bank
notified the Farmer's State Bank
that nothing had been heard from the
Matthews and Wetzel notes sent for
collection. Officials of the
Farmer's State Bank pressed Horner
as to his actions and gave him 24
hours to make good the amount under
threat of suing his bond. He secured
the money and turned it over the
Farmer's State Bank.
On ________ 1923, the bankruptcy
referee appeared before a grand jury
and won an indictment charging
embezzlement, false pretenses on the
handling of the Mathews and Wetzel
notes, and then later, handed down
four more indictments against Andrew
Annan and Andrew Horner stemming
from charges made based on the
non-payment of claims aggregating
$154. The largest claimant was the
bank's principle nemesis: Dr.
Jamision.
Arrest & Trial
On the afternoon of Thursday, Sept
20, 1923, Edgar L. Annan and Annan
A. Horner were arrested by Deputy
Sheriff Charles W. Smith. Following
their arrest, they were brought to
the Sheriff's office where bail for
Horner was set at $2,000 and fpr
Annan at $1000.
Thomas Baumgardner bailed out Horner
and Robert L. Annan bailed out his
brother Andrew.
The arrests caused a great deal of
excitement in the town. A warrant
for the arrest of Annan Horner had
been sent to the Deputy Sheriff
Addlesburger on Wednesday. The
warrant for the arrest Edgar Annan
was sent to Baltimore, where he had
moved.
On Thursday morning, Andrew drove to
Emmitsburg from his home in
Baltimore, where he had moved two
week prior, to address some business
matters. Upon arriving in town, he
was arrested. Horner was arrested as
he walked down Main Street near the
center of the town.
When it became known that the
arrests had been made, a crowd of
several hundred people assessable at
the square to witness the officers
pass with the men in custody.
While it was generally known that
the grand jury had indicted the
former bankers, the utmost secrecy
was maintained on the part of the
State's attorney and court official
until the warrants were issued and
arrests made.
The specific changes made against
the two involved the settlement of
the estate of Charles Shuff. The
warrants charged that the bank
failed to pay certain creditors of
the estate and that the bank had
illegally obtained loans, old notes
that had been paid off or renewed.
After arriving at the sheriff's
office, Annan Horner retained former
State's Attorney Samuel Lewis, while
Andrew Annan retained Reno Harp. The
pair were subsequently transported
to Frederick, where they were
arraigned before a judge and
formally charged with false
pretense, larceny and embezzlement.
By 6:30 p.m., bail had been posted
and both men were on their way home.
On
Thursday, September 25th, Andrew
Annan's trial began. The courtroom
was filled to capacity, mostly with
residents of Emmitsburg. From the
very beginning, the prosecution and
defense clashed over how facts were
to be interpreted. It is called one
of the most completed cases ever to
be brought before the court because
much of the testimony involved
intricacies of reporting roles and
responsibilities of the Annan-Horner
Bank to its new owners the Farmers
State Bank. Following the Farmers
State Bank's take takeover of the
Annan-Horner Bank, the books and
records of the two were separate.
Many of the questions posed by the
prosecution involved why one account
was débuted or credited vice
another.
The complexity of the case was
demonstrated by the contention of
the defenses to the effect that the
transactions in question were
between a creditor and debtor and,
therefore, could not legally be
construed as embezzlement.
The State's case:
"While Horner was employed as
cashier of the Farmer's State
Bank, which was the agent for the
Baltimore Commercial Bank, he was
the recipient of two notes
aggregating $1,100, sent by the
Baltimore Bank to be collected
from the Annan-Horner Bank, which
was in the process of liquidation.
The notes are alleged to have been
received by Horner in May 1922.
One note was that of Francis
Matthews for $900 and the other
was that of Albert Wetzel for
$200.
Nothing was heard from the Farmers
State Bank until the following
December at which time the
Baltimore bank is alleged to have
gotten into communication with
officials of the Farmers' Bank.
The transactions between the two
banks involving the notes is
alleged not to have been known by
the other banking officials until
then.
When Horner was questioned about
the matter by his superiors he is
alleged to have said that the
transaction was "O.K.," but it is
alleged Horner was told that he
"would be given until morning to
make good," or the Farmers' State
Bank would sue his bond. Horner
then paid the money, but the
charge was, however, pushed."
The Defense's case
"When the Farmers' State Bank of
Emmitsburg took over the business
of the Annan-Horner Bank, the
State Bank Examiner instructed
that the accounts of the two firms
be kept separated. Before this
transaction however, the Annan-Horner
had borrowed a sum of money from
the Baltimore Commercial Bank in
which it was required to post a
20% collateral as added security.
Among the collateral deposited
with the Baltimore Bank were the
two notes of Francis Mathews and
Wetzel, money that had been
borrowed from the Annan-Horner
Bank.
Upon receipt of the notes, Horner
noticed the pair. Mathews and
Wetzel went to the Farmers State
Bank, of which Horner was the
cashier, and applied for a loan to
cover the original loans. With the
money form these new loans,
Mathews and Wetzel paid off the
Annan-Horner notes.
Horner then deposited the money
into the account of the Horner-Annan
Bank vice returning the funds to
the Baltimore Commercial Bank. The
justification for this action
according to the defense was the
Annan-Horner Bank was not required
to turn the money over to the
Baltimore Commercial Bank as that
bank still had in excess of 20%
collateral assurance. The money
was subsequent used to pay off the
Annan-Horner's debts during
liquidation."
The
Baltimore bank is then alleged to
have threatened the Farmer's State
Bank at Emmitsburg with suit because
the money was not paid. The
Baltimore bank claimed that the
Farmers State Bank was their agent
and, as such, was to have made the
collection. When the suit was
threatened it was alleged that the
$1,100 involved was paid over to the
Baltimore Bank by the Farmers State
Bank, which in turn demanded that
Horner make redress. Horner and his
wife then borrowed the $1,100 from
another bank in Emmitsburg, and
turned the money over to the
Farmer's State Bank.
On September 28 Andrew Horner got
the first good news in what probably
seemed a life time. "Not guilty of
Intent to defraud" was the verdict
of the court.
In presenting his basis for the
conclusion, the judge noted:
"The Annan Horner Bank and the
Farmer's Bank had been instructed by
the State Bank Examiner, after the
failure of the Annan, Horner & Co.
To keep all accounts separate. He
explained that the Baltimore
Commercial Bank held 20% more
collateral security than the amount
of the Annan-Horner loan and, for
this reason, it was appropriate to
apply the proceeds of the Mathews
and Wetzel notes to the insolvent
bank."
In
November, the referee took up the
case of sale of the families'
holdings in the Emmitsburg Water
Company, of which the members of the
bankrupt firm were large
shareholders. It was revealed that
the stock was pledged to the
Baltimore Commercial Bank. The
Baltimore bank agreed to sell the
stock to a group of citizens in
Emmitsburg led by the Hays family,
and to allow the proceeds above and
beyond its loan be applied to settle
account with the banks depositors.
On
Dec 4, the J. Stewart Annan's
property on the north side of West
Main Street, a two and ˝ story brick
dwelling, was sold at a sheriff's
sale to Elizabeth N. Annan for
$4,025. Andrew Annan Horner's house,
a two and ˝ story brick dwelling,
located on what is know as Shield
Addition, was sold to Helen Bruce
Horner for $3,025. The 234-acre
Annan farm situated about 3.5 miles
southeast of Emmitsburg on Keysville
road was withdrawn from the sale, as
the auctioneer deemed the prince
offered too little.
On March 8, 1924, Edgar Annan and
Andrew Horner finally got their day
in court for the remaining charges
and were found not guilty.
The embezzlement charges were based
on the non-payment of claims
aggregating $154. The largest
claimants were Dr. B. Jamision and
Dr. John Brawner.
It was shown by the testimony that a
large number of claims were paid by
the trustees and that four or five
claims remained unpaid. The unpaid
claimants, it was alleged, owned the
estate, and for this reason it was
testified and the trustees refused
to settle the claims. It also showed
that the trustees had ample funds on
hand from the estate in its hands to
pay the claims. Furthermore, it was
to shown that the commissions of the
trustees were not drawn from the
trustee funds, but remained and
constituted a balance above the
amount of the claims.
The prosecution, assisted by Author
Willard, set forth that the trustees
did not have from the estate
sufficient funds to pay all
claimants the charge of embezzlement
was based upon the amount to the
unpaid claims. However, the
prosecution's arguments didn't win
over the court.
In their finding for the defendants
the court said:
"Upon
the evidence we can have no
hesitation in rendering a verdict
of 'not Guilty' The funds to which
the charge of embezzlement in this
case refer to were aggregating
about $154 audited upon the claims
of two creditors of an estate
which the defendants were
administering as trustees. The
testimony clearly shows that the
pavement of the two dividends was
suspended by the trustees because
the creditors were indebted to the
trust estate. It was solely for
that reason and not because of any
criminal or fraudulent purpose
that the checks for the sums
mentioned in the indictment were
not delivered. The dividends on
claimed of numerous other
creditors were dully paid. The
trust funds were deposited by the
trustees in the bank of Annan,
Horner & Co, which was then
solvent. There was no
misappropriation of any part of
the money by the defendants, and
they did not even withdraw for the
bank account the commission to
which they were entitled. There
was sufficient balance in the
account to the credit of the
trustees to pay the dividends in
question. And, if the two
creditors had adjusted or
disapproved the counter-claims
against them, the checks for the
amount audited to them would have
been delivered and pain at any
time during the period of several
years that elapsed before the
failure of the bank in which the
funds were deposited. It would be
plainly unjust to deprive the
defendants of their liberty for
the conduct which has been
presented by the testimony in this
case."
Epilog
While Andrew Horner and Edgar Annan
were found not guilty of the charges
brought against them, they and their
families never recovered the good
will of the residents of the town
and moved on.
Proud men, they were terribly
humiliated to be forced to walk
through town in handcuffs in front
of people they had known all their
lives. Less than three days later,
Anna E. Annan Horner, the wife of
Major Oliver Horner, and the
matriarch of the families, died.
According to
Polly Baumgardner Shank,
the youngest daughter of Thomas and
Mary Morrison Baumgardner, and niece
of Andrew Horner and Edgar Annan,
and the oldest remaining relative,
"Aunt Anna died of a broken heart
over the whole thing."
Polly Baumgardner oldest brother,
Carl Baungardner drove Andrew Annan
and his family to Ohio where they
joined up with his cousins the
Agnews. The Agnews had a very
profitable potter works and, with
their help, Andrew rebuilt his life.
In 1931, he returned to Washington
where he built a reputation as a
highly successful and respected
lawyer. According to family legend,
he held the bible during the
swearing in of one of the
presidents.
All
of Andrew Annan's brothers and
sisters moved to their summer home
in Lynn Massachusetts following the
collapse of the bank and proceed on
with their lives. Andrew's brother
"O. A." would eventually rise to the
position of president of Pittsburg
Glass. Andrew Annan died in 1945.
Edgar Annan stayed in Emmistburg,
but disappeared from public life.
While never charged, nevertheless,
J. Steward Annan's personal fortune
and land were ceded to cover the
debts of the bank. As noted above in
1921, he was forced to sell his
Fort Henry mansion. In
1924, he lost all his farms,
including the
Long Field, which had
resided in the family for well over
100 years.
As
few people in the area had
sufficient funds to purchase J.
Stewart Annan's property, or the
other farms forced into bankruptcy
because of the repercussions of the
bank's failure, many local farms
passed into the hand of outsiders
and, with it, many old names that
had been uttered since the first
settlement vanished.
J.
Stewart Annan and his family moved
to Hagerstown where he and wife
lived a more modest lifestyle. He
eventually opened up an insurance
business.
In
1931, J. Stewart Annan, a man who
single-handily did more to enhance
the quality of life in Emmitsburg,
died.
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