Appeal
from Circuit Court, Fayette County.
O'REAR
J.
Appellant
prosecutes this appeal from a verdict and judgment convicting
and sentencing him under a charge of embezzlement. He and
four others, in May, 1900, organized, as corporators, the
Industrial Mutual Investment Company. Its authorized capital
stock was $5,000, of which each one of the incorporators
subscribed $1,000. They then paid in on their several
subscriptions the sum of $50 each, executing their notes to
the company for the balance. Whether they ever actually paid
any of this balance is not perfectly clear, although they
claim that they did. The object of the corporation, as stated
in the articles, was as follows: "The nature of the
business and the object and purposes proposed to be
transacted, promoted and carried out by said corporation,
shall be the issuing and selling with the right to redeem:
Certificates of Membership in the Corporation, subject to the
terms, conditions, restrictions and limitations named in said
certificates of said corporation. The conditions, terms,
restrictions and limitations shall be named in each
certificate of membership, and shall be constituted and
become a part thereof. Also the buying or selling of real
estate and personal property, bonds, stocks and securities of
all kinds, and the investment of accumulations and the
surplus in real estate, stocks, bonds and other
securities."
It may
be here stated that the corporation never in fact did any
other business, so far as the record shows, than issuing the
membership certificates alluded to.
These
certificates of membership were sold to the public. Exactly
what relation the holders then bore to the corporation does
not seem to have been clearly understood by the incorporators
or the dealers. The incorporators insist most earnestly, and
back their contention by the opinion of counsel procured
before they embarked in the enterprise, that the certificate
holders were in no sense members of the corporation, and were
not entitled in any event to share in its profits or net
accumulations. By a statement contained in the charter,
limiting the corporation's indebtedness to $5,000, it is
indicated that they were not regarded as creditors either. It
may be as well to say now that their relation was that of
creditors of the corporation. The contract represented by the
"membership certificate" was as follows:
"Certificate
of Membership.
"The
Industrial Mutual Deposit Company.
"Lexington,
Kentucky.
"These
Presents Witnesseth, that -- of --, State of --, has filed
an application, which is a part of this contract, and has
paid the Industrial Mutual Deposit Company, of Lexington,
Ky. (a corporation) the sum of -- Dollars, it being for one
week's installments on -- coupons numbered serially
from -- which coupons are a part hereof.
"Now,
in consideration of said payment and the further agreement
of the holder thereof, on or before of each Monday of each
week, from the date of the issuance of these coupons, to
pay at the office of the Company, or to some duly
authorized agent thereof, five cents upon each redeemed
coupon made a part hereof, as said before, and
so on, continuing until all of said coupons shall be
redeemed by said company.
"The
said Industrial Mutual Deposit Company promises and agrees
to pay to said -- or to his or her heirs, personal
representatives, or assigns upon the redemption of each of
said coupons, one dollar and sixty cents ($1.60) on every
dollar ($1.00) paid to keep same in force to the date of
redemption less ten cents (10c) on each coupon when
redeemed.
"The
terms and conditions printed on the back hereof, and in the
application for same are made a part of this certificate as
fully as if recited over the signatures hereto affixed.
"In
Testimony Whereof, The Industrial Mutual Deposit Company
has caused these presents to be executed by its President
and Secretary, and its corporate seal to be affixed, in the
City of Lexington, Kentucky, this the July 23, 1900.
"A.
P. Taylor. President.
"[Seal.]
Frank Gilmore, Secretary.
"(Conditions.)
"(1)
If any installment of weekly dues be not paid on Monday of
any week, then the coupon upon which default is made shall
be marked void for that week, and shall not be entitled to
participate in the Redemption fund for said week; and if
such default continues for four consecutive weeks, then
this contract shall become void, and of no effect, and the
holder thereof shall forfeit all money paid on same to the
Company.
"(2)
The coupons hereto attached shall not be eligible for
Redemption until eight weekly installments of dues shall
have been paid thereon.
"The
Company reserves the right to redeem said coupons, or any
of them, at any time in the manner provided for by the
By-Laws of said Company, and upon the payment of the amount
hereinbefore promised, and binds itself to redeem all
coupons, within one hundred and four weeks upon which one
hundred and four weekly payments have been made.
"(3)
The weekly collections on dues are divided into eight
funds namely:
"(a)
General Redemption Fund,--which consists of 20 per cent.
of weekly collections on dues, and is used to redeem
coupons that are eight or more weeks old, and are in
force by a fixed mathematical rule, numeral apart system,
which is determined each week by the number and value of
each eligible coupon in force; and by the amount of money
in said fund.
"(b)
Mortuary Fund, which consists, of 10 per cent. of the
weekly collections on dues and is used to pay off death
claims. If there are no death claims any week, this Fund
is added to the General Redemption Fund and is used for
the same purpose.
"(c)
Special Redemption Fund, which consists of 10 per cent.
of collections on weekly dues, and is used to redeem
every tenth eligible coupon in force each weekly
Redemption.
"(d)
Grand Special Redemption Fund, which consists of 15 per
cent. of the collections on weekly dues, and shall be
used to redeem the oldest coupon in force on the Register
consecutively.
"(e)
Cash Surrender Fund, which consists of ten per cent. of
the weekly collections on dues, and is used the 30th week
and each week thereafter, to pay cash surrender claims.
If there are no such claims at the 30th week or
thereafter, this fund shall be added to the Grand Special
Redemption Fund, and shall be used for the same purpose.
Up to thirty weeks this fund shall be added to the Grand
Special Redemption Fund and every other week thereafter
unless there be a cash surrender claim. Thus increasing
the Grand Special Redemption fund to 25 per cent. of
weekly collections on dues, said increased fund to be
used as above set forth.
"(f)
Reserve Fund, which shall consist of 20 per cent. of the
weekly collections on dues, and income derived from the
investment of said fund and such other sums as the Board
of Directors may add, and shall be used to guarantee the
payment of all matured obligations of the company by
reason of the issuance of certificates.
"At
no time shall the reserve exceed by 20 per cent. the
entire amount paid in on unredeemed coupons.
"When
amount at any time shall exceed said sum it shall be
passed to the General Redemption Fund.
"(g)
Surplus Fund, which shall consist of five per cent. of
the weekly collections on dues, and shall be used or
invested as the Directors may elect for the best interest
of said company.
"(h)
Expense Fund, shall consist of ten per cent. of the
weekly collections on dues and of the transfer fees, and
shall be used for the current expenses of the company,
and for such other purposes as the Directors may direct.
"(4)
All coupons are numbered consecutively.
"(5)
Death Options. In the event of the death of the holder of
this certificate, his or her heirs or personal
representatives may accept the following options to-wit:
(First) accept in cash all money paid in on unredeemed
Coupons less ten per cent. on each Coupon.
"(2nd)
May continue this contract, for the benefit of
decedent's estate. The payment of death claims shall
be from the Mortuary Fund and are to be paid in the order
of their applications for same.
"(6)
Borrowing option: After 24 or more weekly dues have been
paid the holder may borrow all the money in the reserve
fund that has been placed there from the weekly dues by
said holder. Said loan to be applied to the payment of
dues on said coupons, and said coupons shall be assigned
to the
Trustees of Reserve fund as collateral for said loan. Said
loan shall bear six per cent. interest per annum and shall
be paid out of the first maturing coupons.
"(7)
Surrender Cash Options: After 30 or more weekly dues have
been paid, the holder may surrender this contract and
receive in cash ninety per cent. of all money paid in on
unredeemed coupons hereto attached. Cash Surrender option
to be paid out of cash surrender fund in the order of
application for same.
"(8)
Application for any option:--offered in this contract to be
effective must be made in writing within two weeks after
the last weekly dues were paid otherwise the Company will
not be bound by them, nor will it be bound to extend any of
these options until after two weeks from the date of
application.
"(9)
These Coupons, are only transferable on the books of the
Company, and for such transfer one half cent will be
charged on each coupon.
"(10)
All Remittances, for credit on coupons are sent at the risk
of the
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