-::iss^ UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY Gift of Howard 3uit A TREATISE ON BUILDING ASSOCIATIONS, ADAPTED TO THE USE OF LAWYERS AND OFFICERS. WITH COMPLETE SET OF FOEMS. By CHARLES N. THOMPSON. CHICAGO: CALLAGHAN & COMPANY. 1892. T T 372^3 k COPYEIGHTED BY CALLAGHAN & COMPANY. 1892. t PREFACE. My purpose is to give an authoritative exposition of tlie law of building associations, in such concise and clear form as to be available in the hands of both lawyers and persons interested in the subject matter. Consider- ing it as the most logical and satisfactory method, I have started with the building association in its prelimi- nary organization, and examined its career through to final settlement and dissolution, from both legal and practical standpoints. It is my intention that the unpro- fessional reader may disregard the notes, while the lawyer may examine the authorities therein referred to as sup- porting any given proposition. It is believed that any work citing the law, to acquire the confidence of the reader, must also refer to the authorities supporting the propositions. The only law book in the United States on the subject, was written ten years ago, and since then, statutory enactments of the different states have made such changes as to justify a new treatment. A purpose auxiliary to the chief one has been to simplify the legal status of a building association, and to avoid the application of some more or less complicated doctrines maintained by some courts. In sustaining this purpose, parts of the book will appear elementary to the lawyer. 306197 IV PEEFACE. Some years' connection with building associations, in different capacities, has given me an opportunity to observe their practical workings. Suggestions of remedies for their needs, are, therefore, the outgrowth of these observations. No attempt has been made to give tables for apportioning or declaring dividends. It is mathematics, as in any other calculation, and while there have been many ingenious labor saving tables invented, there is no unanimity as to their perfect accuracy. Each secretary, generally, has his own method, borrowing some, perhaps, from other systems and adding his own notions, and the variation in the results obtained is but slight. The forms have been prepared after examining those in use in the different states. I desire to acknowledge the kindly assistance of Mr. Charles E. HoUoway, of Indianapolis, in securing those forms, 0. K. T. IlTOIANAPOLTS, August 1st, 1892. TABLE OF CONTENTS. CHAPTER I. mTRODUCTIOK Section 1. Origin of Building Associations .._.. Section 2. Definition of Building Associations Section 3. General Scheme.... .___ - ... Section 4. Different Types i — . CHAPTER II. PKELIMINAEY ORGANIZATION". Section 1. Preliminary Agreements ... Section 2. Agreements Legally Considered Section 3. Articles of Incorporation Section 4. Corporate Name Section 5. Preparation of Corporate Articles Section 6. Conformity with Creative Law Section 7. Procedure after Registration CHAPTER III. CHARTER. Section 1. Importance of Charter. ._ Section 2. Must generally adhere to Statute — Section 3. What Constitutes Charter and its Legal Effect. Section 4. Effect of Failure to Observe Statute Section 5. Construction Section 6. Amendment Section 7. Corporate Seal V VI Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. TABLE OF CONTENTS. CHAPTER IV. MEMBERS. Effect of Incorporation Membership Qualifications Purposes of Membership .- Purpose not Material Right to Borrow — Right to Withdraw Certificate of Stock and Passbooks Member Estopped to deny Incorporation -— Illegal to invest Funds in Other Corporations ..-_. Death of Stockholder * Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. CHAPTER V. BY-LAWS. Framing and Adoption Definition. Power to Enact and Amend. Notice of Amendment.... Character of By-Laws Construction of By-l^aws Amendment of By-Laws Resolutions and Amendment Mode of Amendment Provisions of By-Laws Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Section 12. CHAPTER VI. GOVERNMENT AND OFFICERS. Officers and Election Pass-books and Dues General Meetings - Special Meetings Quorum, Voting and Proxies Objects of General Meetings Character, Duty and Liability of Directors General Guidance for Directors Minutes of Meetings Powers of Directors Term of Election of Directors Duties of President TABLE OF CONTENTS. vn Section 18. Duties of Vice-President . . . Section 14. Duties of Secretary Section 15. Duties of Treasurer . Section 16. Duties of Attorney Section 17. Appraising Committee Section 18. Percentage of Value to be loaned . ...... Section 19. Executive Committee - Section 20. Auditing Committee . .. Section 21. OflBcers' Bonds ... Section22. Sureties on Official Bonds.. Section 23. Resignation and Removal of Directors _ Section 24. Officers' Relations and Responsibilities to the Association. CHAPTER VII. POWERS. Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Seation 7. Section 8. General Powers , Implied Powers.... Powers of Agents... ... Power to Sue Power to Compromise with Shareholders Power to Loan Money Power to hold Real Estate Power to issue Stock to Another Corporation. CHAPTER VIII. RIGHTS OF MEMBERS. Section Section Section Section Section Section Section Section Section Section 10 Section 11. Section 12 Section 13. Section 14. Legal Status of Members __ Preferential Stock Paid Up Stock Members and Officers must observe Rules Member's Right to Inspect Books - Member as an Investor Payments Right of Withdrawal Manner of Withdrawal -- Legal Status of Withdrawing Member.. Liability of Withdrawing Members Rights of Withdrawing Members of Insolvent Associa- tion - - Right to Withdraw Limited to Present Funds Stock Pledged Cannot be Withdrawn VIII TABLE OF CONTENTS. Section 15. Amount Withdrawable ..... — — . Section 16. Construction of B}'-Law3 Concerning Withdrawals.. . Section 17. Transfer of Shares .. Section 18. Forfeitures....... --• Section 19. The Legal Status of Member as Borrower , Section 20. Duty of Association to Loan its Money — Section 21. Selection of Borrower Section 22. Methods of Premium Charges Section 23. Auction Premiums — - Section 24. Premium Fixed, Unchangeable Section 25. Premiums Chargeable to Maturity Only - Section 26. Formal Application for Loan Section 27. Appraisement — Section 28. Abstract of Title Section 29. Interest Not Collectible on Interest and Premium... Section 30. Payment of Instalments Section 31. Provisions of Note or Bond Section 32. Provisions of Mortgage - Section 33. Complaint upon Bond or Mortgage Section 34. Loans to Outsiders Section 35. Loans to Married Women Section 36. Mortgage Covenants _. Section 37. Application of Payments Section 38. Assignment of Shares as Collateral Security Section 39. Payments on Stock not ipso facto payments on lean. Section 40. Paymenti on Re-assigned Stock Section 41. Assigned Shares Cannot be Credited . Section 42. Liability of Borrower under his Mortgage for Losses. Section 43. Acknowledgment of Mortgage Section 44. Leases by the Association Section 45. Satisfaction of Mortgages Section 46. Borrower Entitled to Set Oflf Section 47. Amount Payable Upon Foreclosure Section 48. The English Rule Section 49. Rule Laid Down Upon Voluntary Re-paj-ment Section 50. Uncertainty of the Foregoing Rules Section 51. The Natural and Logical Rule Section 53. By-Laws should Provide for Record Cancellations... CHAPTER IX. FINES. Section 1. Necessity of Fines Section 2. Must be Reasonable Section 3. Stop After Foreclosure Section 4. No Interest on Fines Section 6. Are Lien on Stock TABLE OF CONTENTS. IX CHAPTER X, USUIIY. Section 1. Definition Section 2. Premium not Usurious as Formerly Section 3. Premiums Authorized by Statute Section 4. Wlien Interest is not Usurious Section 5. Illegal Interest not Recoverable by Association. Section 6. May be Recovered Back by the Borrower Section 7. A Personal Defense Section 8. Rule for Officers CHAPTER XI. POWER OF THE ASSOCIATION TO BORROW MONEY. Section 1. A Practical Aspect Section 2. English Authorities __. Section 3. American Authorities Section 4. Weight of American Authorities Section 5. Implied Povrer to Borrow Section 6. Overdrawing Bank Account is Borrowing Section 7. Resolution to Borrow Section 8. The Effect of Assigning Mortgages Section 9. No Power to Sell Its Mortgages CHAPTER XII. DISSOLUTION AND SETTLEMENT. Section 1. Section o Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Section 9. Section 10. Section 11. Dissolution when all Stock is Matured Other Methods of Dissolution What Acts Will Not Dissolve Dissolution by Unanimous Agreement Effect of Appointment of a Receiver Final Settlement with Members and Creditors. Settlement Before Maturity Assignment for Creditors Appointment of Receiver amd Winding Up... Marshalling of Assets Liability of Stockholders X TABLE OF CONTENTS. Section 12. Liability of Borrowers for Debts ,,. Section 13. No Liability for Losses under the Mortgages Section 14. Liability of Withdrawing Member Section 15. Assets to be Distributed among Borrowers and Non- Bor- rowers alike Section 16. Consolidation of Associations CHAPTER XIII. PRACTICAL RESULTS. Section 1. The Character of a Building Association Section 2. Method of Loans - Section 3. Some Results - APPENDIX. STATUTES AND CONSTRUCTION. FORMS OF Agreement for Incorporation - Application for Membership - Articles of Association - Act of Incorporation - Stock Certificate - Assignment --- - By-Laws - Application for a Loan - Appraisers' Report Rules - Mortgage Note - -- Bond Mortgage - - — Transfer for Loans - Note Trust Deed Insurance Clause -- Bond Bond Used by Pennsylvania Associations - Mortgage Used by Pennsylvania Associations - Bond Used by New Jersey Associations - Mortgage Used by New Jersey Associations Mortgage Used by the Mutual Home Saving and Loan Association of Dayton, Ohio — - Bank Mortgage Used in Massachusetts - TABLE OF CONTENXa XI FORMS OF Stock Register Warrant Bank Check Building Agreement . Building Specifications Indemnifying Bond Against Liens. Contractor's Waiver of Liens Sub-Contractor's Waiver Bond for Secretary . Bond for Treasurer . ..x . ^^'7 '^ TABLE OF CASES. A Page. Abbott V Building Association, 1 Del., 397 156 Albright V Building Association, 102 Pa. St., 411 17-53 Allemania, etc., Association v Mueller, 8 Bull, 97 93 Allen V Curtis, 26 Conn., 456 38 Anderson V Cleburne, etc., Association, 16 S. W. Rep., 298 17 Archer v Harrison, 3 Jur., N. S., 194 94 Armitage vWalker, 2 Jur., N. S., 13 67 Ashland, etc., Co. v Centralis, etc.. Association, 9 Luz. Leg., Reg., 41 (Pa.,) 44 Association v Commonwealth, 2 Chest., 546 156 Association V Bollinger, 12 Rich., Eq., 124 102-108 Association V George, 3 W. N. C, 239 105 Association V Kribs, 7 Leg «& Ins. Rep., (Pa.,) 21 63 AsBOciation v Neurath, 2 W. N. C, 95 105 Association V Steele, 11 W.N. C, 204 83 Association V Wall, 7 Phila., 189 125 Athol, etc., Co. V Carey, 116 Mass., 471 ^ 11 Atkinson v Bradford, etc., Society, L. R., 25 Q. B. Div., 377 69 Atwood V Dumas, 149 Mass., 167 2-64 Auld V Glasgow, etc.. Society, 12 App. Gas., 197 81 B Babcock v Middlesex, etc.. Bank, 28 Conn., 302 87-153 Baltimore, etc.. Society v Taylor, 41 Md., 409 81-103-104-106 Bank V Porter, 2 Watts, 141 91 Bank, etc., v St. John, 25 Ala., 566-611 39 Bank of Commerce's Appeal, 73 Pa. St., 59 70 Barker V Bigelow, 15 Gray, 130 86-87 Barndt V Gruel, 4 Leg. Gaz., 388 54 Barton V Enterprise, etc. Association, 114 Ind., 226. 116-129 Bates V Peoples', etc., Association, 43 Ohio St., 655 25-103-156 Bauer V Samson Lodge, 102 Ind., 262 29 Baxter V Mclnty re, 13 Gray, 168 2-98-154 Bechtoldv Brehm, 26 Pa. St., 269 71-77 Beoketv Building Association, 88 Pa. St., 211 157 XIII XIV TABLE OF CASES. Page. Bergman v St. Paul, etc., Association, 29 Minn., 275 15-29-68 Bexar, etc., Association v Robinson, 78 Tex., 1(53 105 Bibb Co., etc.. Association v Richards, 31 Ga., 592 2 13-77-103 Birmingham v Maryland, etc.. Association, 45 Md., 541 52-81-105 Blackburn, etc., Society, V Cunlifife, 20 Ch. D., 902 Ill Blake V Buffalo Creek R. R. Company, 56 N. Y., 485 42 Blake v Wheeler, 18 Hun., 496 48 Booz'8 Appeal, 16 W. N. C, 365 128 Booz's Appeal, 109 Pa. St., 594 69 Borchusv Huntington, etc. Association, 97 Ind., 180 82 Border State, etc.. Association v Hayes, 61 Md., 597 ..96 154 Border State, etc. Association v Hilleary, 68 Md., 52 105 Boston, etc.. Company V Langdon, 24 Pick, 49 119 Bowker \? Mill River, etc.. Association, 7 Allen, 100 103-120-124 Brooks V Blackburn, etc.. Society, L. R. 9 App., Cas., 857 114 Brownlie V Russell, L. R., 8 App. Cas., 235 128 Bryant V Cowart, 21 Ala., 92 91 Bucklee V Lordonny, 56 L.J. Ch., 437 128 Buffalo, etc. Company v Gifford, 87 N. T, 294 11 Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu Bu ng Association's Appeal, 33 P. L. J., 324 122 ng Association's Estate, 12 W. N. C, 207 65 ng Association v Arbeiter Bund, 6 Bull, 823 25-62 ng Association V Bayley, 1 Kulp, 215 88 ng Association V Building Association, 100 Pa. St., 191 156 ng Association V Coleman, 89 Pa. St., 428 157 ng Association V Commonwealth, 98 Pa. St., 54 156 ng Association v Egger, 5 Bull, 752 93-97 ng Association v Eshelback, 7 Phila., 189 88-125-156 ng Association v Gallagher, 3 L. T. N S., 101 87 ng Association V George, 3 W. N. C, 239 .86 ng Association v Groesbeck, 41 L. I., Pa., 16 87-101 ng Association v Hanlen, 7 Luz. L. Re.ir., 165 157 ng Association V Henderson, 3 Bull, 386 ■ 70 ng Association v Hetzel, 103 Pa. St., 507 82 ng Association V Hoary, 8 Luz. L. Reg., 180 157 ng Association v Hungerbuehler, 93 Pa. St., 258 88 ng Association v Goldbeck, 13 W. N. C, 24 42 ng Association v Jones, 2 L. T. N. S., Pa., 17 29 ng Association V Kelley, 1 Kulp, 9. 119 ng Association v Leyden, 1 Bull, 126 93 ng Association v Lyons, 2 Kulp, 409 82 104 ng Association v Mangan, 2 Kulp, 210 88 ng Association v McDermott, 2 Kulp, 203 ..83 ng Association V Mixell, 81 Pa., St., 313 83 ng Association V Minnick, 1 Kulp, 513 62 ng Association v Morgan, 2 Kulp, 19 ....87 TABLE OF CASES. XV Page. Building Association v Morganthal, 3 Pears, 343 17 Building Association v Raber, 11 Pliila , 546 86 Building Association v Rice, 8 W. N. C, 12 83 Building Association v Roan, 9W. N. C, 15 86 Building Association v Robinson, 46 L. 1., Pa., 5 22-30-82-156 Building Association vRood, 2 Kulp, Pa., 246 87-93 Building Association v Rowe, 15 L. I., 45 88 Building Association V Scliuller, 3 W. N. C, Pa., 431 81-100 Building Association v Semiller, 35 Pa. St., 225 50-156 Building Association v Silverman, 85 Pa. St., 394 65 Building Association v Sperring, 106 Pa. St., 334 66-69 Building Association V Taylor, 13 W. N. C, 13 85 Building Association v Timmins, 3 Phila., 209 77 Burbridge v Cotton, 8 Eng. L. & Eq. R., 57 76-103 Burke v Home, etc, Association, 7 Bull, 114 79 Burlington, etc., Association V Heider, 55 Iowa, 424. 77-106 c Callahan's Appeal, 124 Pa. St., 138 98 Carmody V Powers, 60 Mich., 26 12 Cason V Seldner, 77 Va., 293 81-98-128 Central, etc., Association v O'Connor, 5 Bull, 853... 93 Chapleo V Brunswick, etc., Society, L, R., 6 Q. B. D., 696 109 Cheesebrough V Millard, 1 Johns. Ch., 409 ..126 Chester, etc.. Company v Dewey, 16 Mass., 94 24 Chicago, etc.. Society v Crowell, C5 111., 453 53-84 Chillicothe, etc., Association v Ruegger, 60 Mo., 218 58 Christian's Appeal, 102 Pa. St., 184 123-128 Christie v Northern Counties, etc.. Society, L. R., 43 Ch. Div., 62 31-33 Cincinnati, etc., Association v Flach, 1 Cin., S. C. R., 468 93 Clarksville, etc.. Association v Stephens, 26 N. J. Eq., 351 77-84-85-100 Citizens', etc.. Association v Goriell, 34 N. J., Eq., 383 39 Citizens', etc.. Association v Lyon, 29 N. J. Eq., 110 39 Citizens', etc., Association v "Webster, 25 Barb, 263 95-103-104 Citizens', etc.. Company v Uhler, 48 Md.,455 76 City Loan, etc., Association v Goodrich, 48 Ga.,445 120 City, etc., Company v Fattv. 1 Abb. App. Dec, 347 95-104 Coetmor, etc. Society, 51 L. T. 253 110 Colonial, etc.. Company v Home, etc.. Company, Lim., 33 L. J. Ch., 741. .12 Columbia, etc.. Association v Bollinger, 12 Rich. Eq., 124 77 Columbia, etc.. Association v Dobbins, 15 L. I., 45 88 Columbia, etc.. Association v Crumb, 42 Md., 192 54 Commonwealth v Association, 2 Chest., 189 156 Commonwealth V CoUeu, 13 Pa. St., 133 119 Concordia, etc.. Association v Read, 93 X. Y., 474 82-84-103 Conklin v' People, etc., Association, 41 N J., 20 —.42 XVI TABLE OF CASES. Page. Connolly v Building Association, 6 W. N. C, 176 123 Conrow v Spring Garden, etc.. Association, 21 Leg. Int., 109 186 Cook V Henderson, 8 Rec. (Ohio.,) 429 38 Cook V Kent, 105 Mass., 246 120-154 Cooper V Asgociation, 100 Pa. St., 402-156 Craig V First Presbyterian Cliurch, 88 Pa. St., 42 38 Criswell's Appeal, 100 Pa. St., 488 113-124 Cross V Peach Bottom, etc., Company, 90 Pa. St., 392 19 Cullerne V London, etc.. Society, L. R., 25 Q. B., 485 39-40 Cunningham v Alabama, etc.. Company, 4 Ala., 652 70 Curry V Bank, 8 Port. Ala., 360 30 D Dartmouth College Case, 4Wheat, 518 16 Davies V Creighton, 33 Grat, 696 157 Davis V West Saratoga, etc., Union, 32Md., 285 112 Delano V Wild, 6 Allen, 1 2-77-103 Delaware, etc.. Association v Keller, 2 W. N. C, 29 86 Delaware R. R. Company v Tharp, 1 Houst. Del., 149 18 Denny v West Philadelphia, etc., Association, 39 Pa. St., 154 _..72 Diemer v Egolf, 1 Chest., 55 - 86 Dilzer V Building Association, 103 Pa. St., 86 23 Dobinson v Hawks, 12 Jur., 10 37-24 Doe d Morrison V Glover, 15 Q. B., 103 63 E Early's Appeal, 7 W. N. C, 184 .—.88 Eastern, etc., Company v Vaughan, 14N. Y.,546 -U Eaton V American, etc.. Association, 49 N. W. R., 865 25 Economy, etc., Association v Hungerbuepler, 93 Pa. St., 2.58 125^ Edelin V Pascre, 22 Grat., 326 80-124-128 European, etc., R. R. Company v Poor, 59 Me., 277. 42 Everham v Oriental, etc, Asscjciation, 47 Pa. St., 353 --84 Everman V Schmitt, 34 Bull, 56. 89-128 Eyre v Building Association, 17 L. I., Pa., 143 33 F Farlow v Kemp, 7 Blkf., 544 H Farmer V Smith, 4 H. & N.,196 89 94 Farmers', etc., Bank v Downey, 53 Cal., 466 42 Faulkner's Appeal, 11 W.N. C, 48 56 TABLE OF CASES. XVII Page. Fleming v Self, 24 L. T. Rep., 101 94 Flounders V Hawley, 78 Pa. St., 45 79156 Flynn v Saving Fund, 37 L. I., (Pa.,) 336 86 Folger T Columbian, etc., Company, 96 Am. Dec, 757 119 Forrest City, etc.. Association v Gallagher, 25 Ohio St., 208 29-80-lGO-10I-103-105-15« Fox V Cottage, etc.. Association, 81 Va., 677 93 Franklin, etc., Association v Marsh, 29 N. J. L., 225 103 Franklin, etc., Association, v Mather 4 Abb., Pa., 274 81-155 Franklin Avenue, etc., Institution v Board, etc., 75 Mo., 408 53 Frederick v Corcoran, 100 Pa. St., 413 156 Freeman v Ottawa, etc. Association, 114 111., 182 71-78-140 Friel v Association, 1 Leg. Rec. Rep., (Pa.,) 217 68 Fuller V Salem, etc.. Association, 10 Gray, 94 69 Fulton V American, etc., ABSOciation, 48 N. W. R., 781 25 G Galbraith v Building Association, 43 N. J. Law., 3S9 70 Gerenfield's Estate, 1 Chest, 356 86 German, etc.. Association V Metzger, 9 W. N. C, Pa., 204 54 Germantown, etc., Association v Sendmeyer, 50 Pa, St., 67 24 Qermantown, etc., Company v Fitler, 60 Pa. St., 124 71 Glenn v'Statler, 42 Iowa, 107 48 Glynn v Home, etc.. Association, 22 Kans., 746 95 Goodrich V City, etc.. Association, 54 Ga. 98,123 124 Gordon v Winchester, etc.. Association, 12 Bush., 110 73-77-106 Gouchenour v Sullivan, etc.. Association, 119 Ind., 441 109 Grangers', etc.. Company v Kamper, 73 Ala., 325 IS Grimes T Harrison, 28 L. J. Ch., 23 803 H Hagerman v Ohio, etc.. Association, 25 Ohio St., 186 10-29-30-79-84-93-95-100-101 Haigh V United States, etc., Association, 19 W. Va., 792 65-98 Hamilton, etc.. Association v Reynolds, 5 Duer.,671 84 Hammerslough v Kansas City, etc.. Association, 79 Mo., 80 105 Hampstead, etc., Association v King, 58 Md., 279 120-121 Hand v Society, etc., 18 N. Y. Supl., 157 41 Handley v Farmer, 29 Beav., 362 67-89 Hanner v Greensboro, etc., Association, 78 N. C, 188 77-97 Hanney v Building Association, 16 W. N. C., 450 _ 67 Hansbury v Pfeifer, 35 L. L, 395 15ft XVIH TABLE OF CASES. Page Hardy v Metropolitan, etc., Company, L. R., 7 Ch. App., 427 57 Harris' Appeal, 18 W. N. C, 14 86 Haskett V Flint, 5 Blkf., 69 - H Hawkeye, etc., Association v Blackburn, 48 Iowa, 385 105-106 Hayes V Brubaker, 65 Ind., 27 ■il Hazel, etc.. Association v Groesbeck, 41 L. I., 16 84 Heckman v Building Association, 11 L. Bar., 110 156 Heggie V Building, etc., Association, 107 N. C, 581 55-121 Heintzelman v Driuds, etc., Association, 36 N. W. Rep., 10) 28 Hekelnkaemper v German, etc.. Association, 22 Kan., 549.. 32-86-93-95-120 Henderson etc. Association v Johnson, 88 Ky., 191 106 Henderson, etc., Association v Johnson, 10 S. W. llep., 787 71 Henninghausen T Tisher, 50 Md., 58J- 60-66-93 Herbert V Kenton, etc., Association, 11 Bush., 296 77-106 Herbert v Mechanic's, etc.. Association, 17 N. J., Eq., 497 86-124-126 Hinman v Ryan, 3 C. C, (Ohio,) 529.. 112-120-128 Hoboken, etc., Association v Martin, 18 N. J., Eq., 427 11-59-86-93-95-103-123 Hodges V New England Screw Company, 53 Am., Dec, 637 38-39-40 Holgate V Shutt, L. R., 27 Ch. D., 111. 47 Holmes V Smythe, 100 111., 413 71-78140 Holyoke, etc., Association V Lewis, 27 Pac R., 872 31 Home Association v Boning, 7 Bull, 174 76-79 Horton v Building Association, 6 Bull, 141 91 Hoskins v Mechanic's, etc.. Association, 84 N. C, 838 77-95 Houser v Herman, etc., Association, 41 Pa. St., 478 156 Howard, etc.. Association v Mclntyre, 3 Allen, 571 25 Howlett's Estate, 2 Chest, 511 8G-101 Hughes' Appeal, 30 Pa. St., 471 88 Hughes V Edwards, 9 Wheat, 489 01 Hughes V Lay ton, 10 Jur. N. S., 513 51 HughesvLayton, 33L. J., M. C, 89 56 Hughes V Littlefield, 18 Me., 400 48 Humboldt, etc.. Society v Wennerhold, 81 Cal., 528 30-48 Hunter V Sun, etc. Company, 26 La. Ann., 13 49 Huntington, etc.. Association v Melsoheimer, 14 W. N. C, 344 84 Huylar V Craigin, eie., Company, 40 N. J. Eq., 393 62 Illinois, etc.. Company v Zimmer, 20 111., 654 19 Ingolby V Riley, 28 L. T. N. 8., 55 101 In re Cefn Cilcen, etc. Company, 38 L. J., Ch., 78 114 In re Blackburn, etc. Society, 24 Ch. D., 431 66-69 In re Deveaux, 54 Ga., 673 , 154 In re Doncaster, etc, Society, L. R. Eq, 158 89 TABLE OF CASES. XIX Page. In re Durham Co., etc., Society, 25 L. T., Rep., N. S ,83 57 In re Durham, etc.. Society, L. R., 13 Eq., 516 109 In re Estate National Association, 9 W. N. C, 79 123 In re German Mining Company, 23 L. J., Ch., 956 114 In re Jreffeison, 3 Kulp, 308. 86 In re Middlesbrough, etc.. Society, -54 L. J. Ch., 593 101 In re Mutual Societj', 24 Ch. D., 425 69 In re National, etc., Society, ex parte, Williamson, L. R., 5 Ch. App., 309 109 In re Sunderland, etc., Society, 24 Q. B. Div., 394 68 In re Victoria, etc.. Society, L. R.,9Eq., 605 109 In re West Riding Society, L. R., 43 Ch. Div., 407 128 Jackson V Cassidy, 68Tex., 283 105 Jaclcson V Myers, 43 Md., 452 112 Jarrett V Cope, 68 Pa. St., 67 103156 Johnson V Elizabeth, etc.. Association, 104 Pa. St., 394. 83-93 Jones V National, etc.. Association, 94 Pa. St., 115 53-113 Jungkuntz v Building Association, 6 Bull, 428 68-140 K Kansas City, etc.. Company v Sauer, 65 Mo., 279 119 Kelly V Accommodation, etc.. Association, 2 Phila., 337 88 Kelly V Mobile, etc.. Association, 64 Ala., 501 _ 30 Kilpatrick v Association, 119 Pa. St., 30 63 King V Ashwell, 12 East, 22 31 KingSGSsing, etc.. Association v Roan, 9 W. N. C, 15 185 Kisterbock's Appeal, 51 Pa. St, 483 40 Knoblauck v Building Association, 25 P. L. J,. 39 68 Knoblauck v Robert Blum, etc.. Association, 25 Pitts. L. J., (O. S.,) 39.. 126 Knox V Childersburg, etc., Company, 86 Ala., 180 10 Koehler v Black River Falls, etc., Company, 2 Black, 715 39 Kreamer v Saving Fund, 6 W. N. C, 207 88 Kreamer V Springfield, etc.. Association, 6 W. N. C, 207 135 Kupfert V Uuttenberg, etc., Association, 30 Pa. St., 465 88 Laing T Reed, L. R., 5 Ch. App., 4 109 Lake v Security, etc.. Association, 72 Ala., 307 40 XX TABLE OF CASES. Page. Latham v Washington, etc., Association 77 N. C, 145. 77-103 Laurel Run, etc, Association, v Sperring, 3 Kulp., 67 _ 66 Laurel Run, etc.. Association v JSperring, 106 Pa. St, 334 128 Licking Co., etc., Association v Bebout, 29 Ohio St., 252 103-156 Lime City, etc.. Association V Wagner, 122 Ind., 78 83 Lincoln, etc. Association v Benjamin, 7 Neb., 181 73-77 Lincoln, etc. , Association v Graham, 7 Neb., 173 1 7-77-103 Link V Building Association, 89 Pa. St., 15 86-100-125-156 Liquidators of the Blackburn, etc., Society^ v Cuuliffe52 L. J. Rep., Ch.,92 110-111-114 Lister v Log Cabin, etc.. Association, 38 Md., 115 73-76-89-95-124-120 Loan Company V Conover, 5Phila., 18 112 Looker v Wrigley, L. R., 39 Q. B. D., 397 110 Lord V Essex Building Association, 37 Md., 320 16 Low Street, etc.. Association V Zucker, 48 Md., 448 81-88-121 Lucaa V Greenville, etc.. Association, 22 Ohio St., 339. ..106 Lynn v Association, 117 Pa. St., 1 99-100 M Maguire t State, etc.. Association, 63 Mo., 344 155 Manahan V Varnum, 77 Mass., 405 154 Manufacturers, etc.. Company v Conover 5 Pbila., 18 55 Marble, etc.. Association v Hocker, 3 Phila., 494 156 Martin V Nashville, etc.. Association, 2 Cold, 418 73-77-102 Ma.ssey V Citizens', etc., Association, 22 Kan, 624 55-77-81-88-108 Master Stevedore's Association v Walsh, 2 Daly, 14 71 MattersonvElderfield, 4L. R., Ch., 207 97 McCahan v Columbian, etc., Association, 40 Md., 226 16-30-93-95 McGannonv Central, etc.. Association, 19 W. Va., 726 70-100 McGowan V Savannah, etc.. Association, 80 Ga., 515 154 McGrath v Hamilton, etc. Association, 44 Pa. St., 383 68-89-128 McKenney v Diamond State, etc.. Association, 18 Atl. Rep., 905 28-64-67 McKeown v Building Association, 5 Bull, 52 20-33-122 McLaughlin v Citizens' Association, 62 Ind., 264 103 McNeall v Florence, etc.. Association, 13 Stew., 351 155 Meal v Hiil, 16 Cal., 145 48 Mechanics etc.. Association v Conover, 1 McCart, 219 88-86-87 Mechanics, etc.. Association v Meriden, etc., Company, 24 Conn., 159.. 83-105 Mechanics, etc.. Association V Wilcox, 24 Conn., 147 83-103 Melville v American, etc., Association, 33 Barb, 103 103 Memphis, etc.. Company v Woods, 88 Ala., 630 25 Merrill v Mclntire, 13 Gray, 157 2-84-103 Metropolitan, etc.. Association v Esche, 75 Cal., 513 48 Michigan, etc., Association v McDevitt, 77 Mich., 1 16-23-38-59-63-74-85 TABLE OF CASES. XXI Page. Miller V Jefferson, etc., Association, 50 Pa. St., 32 '■^^ Miller's Estate, 2 Pears, 348 157 Mills V Central, etc.. Company, 481 N. J. Eq., 1 15* Milk V Salisbury, etc., Association, 75 N. C, 293 73-77-103 Minot V Curtis, 7 Mass., 441 H Mobile, etc.. Association v Robertson, 65 Ala., 382 - 92 Montgomery, etc., Association v Robinson, 69 Ala., 413 26-76-103 Monumental, etc, Society v Lewin, 38 Md., 445 30-100 Morrison v Dorsey, 48 Md., 461 11-25-29 Morton, etc., Co. v Wysong, 51 Ind., 4 28 Moses V O'Coee Bank, 1 Lea , 398 39 Mosley V Baker, 12 Jur., 551 94 Mowbray V Antrim, 123 Ind., 24 44 Moxon V Berkeley, etc., Society, 59 L. J., Ch., 524 126 Moye V Sparrow, 22 L. T., Rep. N. S., 154 109 Murray V Scott, 9 App. Cas., 519 HI Muth V Dolfield, 43 Md., 466 - 112 Mutual, etc., Association v Hammell, 43 N. J. L., 78 - 45 Mutual, etc., Association V Meriden, etc., Co., 24 Conn., 159 26-153 Mutual, etc.. Association v Tascott, 28 N. E. Rep., (111.,) 801 75-82 Mutual Savings, etc., Association V Wilcox, 24 Conn., 147 23-153 National, etc.. Association v Hubley, 34 Leg. Int., 6 lG8 Neath, etc.. Society, v Luce, L. R., 43Ch. D., 158 Ill New Haven, etc.. Company v Chapman, 38 Conn., 56 19 Newm»n v Ligonier, etc., Association, 97 Ind., 295 82 Newton Tp., etc.. Association v Boyer, 15 Stew., 273 155 Nicely's Estate, 3 Kulp, 47 - 82-104 North Hudson, etc., Association v First National Bank, 47 N. W. R. (Wis.,) 300 113 North V State, 107 Ind., 356 119 North American, etc.. Association, v Sutton 35 Pa. St., 463 25-86-125 o Oak Cottage, etc., Association v Eastman, 31 Md., 556 104-105 Occidental, etc.. Association v Sullivan, 62 Cal., 39 1 34 Ocmulgee, etc.. Association v Thomson, 52 Ga., 437 95-99 Odd Fellow, etc.. Association v Hogan, 28 Ark., 2t)l 53 Oliver's Estate, 1 Del., 358 86 Orangeville, etc., Association, v Young, 9 W. N. C, 251 78 O'Rourke v Building Association, 8 W. N. C, 176 156 Overby v Fayetteville, etc., Association, 81 N. C, 56 77-95-98 Owen v Roberts, 57 L. T. N. S., 81 Ill XXII TABLE OF CASES. Page. Paffert V Building Association, 25 P. L. J., 40 68 Pangborn V Citizens', etc., Association, 1 Stock, o41 42 Parlier V Butcher, L. R., 3 Eq., 763 100 Parlier V Fulton, etc., Association, 46 Ga., 106 77-103 Parker V United States, etc., Association, 19 W. Va., 744 29-80-100 Patterson V Albany, etc.. Association, 63 Ga., 373 77 Patty V Pease, 8 Paige, 277 126 Payette V Free Home, etc.. Association, 27 111. App., 307 16-17 PeoplevLowe, 117N.Y., 175 23-42-60-98-128 People, etc.. Association, v Furey, 20 Atl. R., 890 60-87-155 People, etc., Associationv Wroth, 43 N. J. L., 70 45-48 People's, etc., Bank v Collins, 27 Conn., 143 86-106 Perrin v Granger, 30 Vt, 595 71 Peters, etc., Association, v Jaecksch, 51 Md., 198 120 Pfaff V Building Association, 6 W. N. C, 349 119 Pfeister v Wheeling, etc.. Association, 19 W. Va., 676 73-80-83-100-157 Philadelphia, etc.. Association v Moore, 47 Pa. St., 233 87 Philadelphia, etc.. Association V Moore, 21 Leg. Int., 109 156 Philanthrophic, etc.. Association v McKnight, 35 Pa. St., 470 105 Phillips V Columbia City, etc., Association, 53 Iowa, 719 105 Phillipsburg, etc., Associationv Hawk, 27 N. J. Eq., 355 86 Pooch V Lafayette, etc.. Association, 71 Ind., 357 51-83 Premium Fund Association's Appeal, 26 Pa. St., 156 71 Provident, etc., Society, v Greenhill, L. R., 9 Ch. D., 122 101 Q Quakertown, etc, Association v Sorver, 33 Leg. Int., (Pa.,) 359 ..126 Quein V Smith, 108 Pa. St., 335 49-113 R Red Bank, etc., Association v Patterson, 37 N. J., Eq., 223. .73-103-104-125 Redmond v Dickerson, 1 Stock, 507 42 Redwine v Gate City, etc.. Association, 54 Ga., 474 13-154 Reeve v Ladies, etc, Association, Ark. Supct. June 25, 1893 78 Reg. V Registrar of Friendly Society, L. R. Q. B., 741 37 Reg. V Grinishaw, 10 Q. B.. 743 37 Reg. V Pratt, 118 Eng. C L.. (6 B. & S. Q. B.,) 673. 37 Reilly V Mayer, 1 Beas, (N. J,) 55 126 Reiser V William Tell, etc, Association, 39 Pa. St., 137 77 Remington V King, 11 Abb. Pr., 278 155 Rhoads V. Hoernerstown, etc.. Association, 82 Pa. St., 180 56156 Richards v Bibb Co., etc.. Association, 24 Ga., 198 95 TABLE OF CASES. XXIII Page Risk V Delphog, etc, Association, 31 OhioSt.,517 80-95 Roberts V Price, 16 L. J. C P., 169 48 Robertson v American, etc., Association, 10 Md., 397 76-83-93-95-103 Robertson V Homestead Association, 69 Am. Dec, 151 22 Robinson v Smith, 34 Am. Dec, 213 39 Rodgers V Building Association, 7 W- N. C, Pa., 95 39 Roseobaclc v Salt Spring, etc., Banli, 53 Barb, 506 71 Rosenberg V Northumberland, etc. Society, L. R., 23 Q. B., 373 128 Rushville Gas Company v City of Rushville, 131 Ind., .HiG 38 Rowland's Estate, 1 Del., 98 . 156 s Salem V Mill Dam Co., 6 Pick., 23 18 Salina, etc, Association v Nelson, 23 Kans., 75 1 154 San Buenaventura, etc.. Company V Vassault, 50 Cal., 534 .37 Saving Fund v Cake, 3 Leg., Rec, Rep., 173 87 Saving Fund v Longshore, 8 Luz. L., Reg., 199 83-157 Saving Fund V Murray, 14 Leg., Int., 133 88 Savings Fund V Young, 9 W. N. C, 351 78 Savings Association V Vandervere, 3 Stock, 383. 155 Savings, etc., Association v Stevens, 5 Bull, 113 79 Schlesinger's Estate, 1 Law Times, N. S., 15 85 Schober V Accommodation, etc. Association, 35 Pa. St., 323 50-88-156 Schutte V California, etc., Association, 23 Atl., Rep., 836 63 Seagrave V Pope, 15 Eng. L. & Eq., 477 76 Seagrave V Pope, 22 L. J. Ch., 258 94 Second Manhattan, etc.. Association v Hayes, 3 Keyes, 192 155 Security, etc., Association V Lake, 69 Ala., 456 69-73-76 SeibelvBuilding Association, 43 Ohio St., 371 60-98-123-128 Seldenv Building Association, 2 W. N. C, 481 86 Selden V Reliable, etc.. Association, 33 P. F. Smith, 336 105-135-157 Shaefer v Amicable, etc.. Company, 47 Md., 126. 54 Shaffrey V Workingmen's, etc., Association, 64 Ind., 100.. 103 Shannon V Dunn, 43 N. H., 194 77-103 Shannon V Howard, etc, Association, 36 Md., 383 76-81-95-99-100 Sheldon V Mayor, etc., 30 Ala., 540 30 Sherman, etc.. Association v Hock, 9 Phila., 75 157 Shibley V Angle, 37 N. Y., 626 11 ShieldsvOhio, 95U. S.,319 18 Shinn V State, 32 Grat., 899 ..49 Siburn v Pearce, L. R., 44 Ch. D., 854 66 Silver V Barnes, 6 Bing., N. C, 180 76-103 Simpson v Building Association, 38 Ohio St, 349 17 Skinner's Estate, 4 Phila., 189 105 Small V Smith, L. R., 10 App., Cas., 119 50 XXIV TABLE OF CASES. Page. Smith V Los Angeles, etc., Association, 78 Cal., 289 43 Smith V Mechanics, etc, Association, 73 N. C, 373 77-81-84 Smith V Pilkington, 4 Jur., N. S., 58 94 Smith V Plank Road Co., 30 Ala., 650 11 Snider's Estate, 34 Leg., Int, 49 156 Somerset Co., etc., Association, V Vanderv^ere, 3 Stock, 383 95 Stile's Appeal, 95 Pa. St., 133 78 Sparrow v Farmer, 36 Beav., 511 89 Sperring's Appeal, 71 Pa. St., 11 40 Spinning v Home, etc.. Association, 36 Ohio St., 483 18 Spring Garden Association v Tradesmen's, etc.. Association, 46 Pa. St., 493 86-125-156 Springviile, etc.. Association V Raber, 33 Leg., Int., Pa., 329 87-125-156 State V Bonnell, 35 Ohio St., 10 37 State V Building Association, 35 Ohio St., 2.58 50-55-113-156 State V Greenville, etc.. Association, 39 Ohio St., 93 78 State V McGrath, 95 Mo., 193 15-155 State V Oberlin, etc., Association, 35 Ohio St., 258 83 State V Redwood Falls, etc., Association, 45 Minn., 154 68-69-155 State V Rohlffs, 19 Atl. R., 1 .99-38 State V Washington, etc., Company, 11 Ohio, 96 18 State, etc., Association v Kellogg, 63 Mo., 540 90 Stebbins V Merritt, 10 Cush., 27 37 Stein V Indianapolis, etc., Association, 18 Ind , 337 53-106 St. Joseph, etc.. Association v Thompson, 19 Kans., 321. _ 83-105 St. Louis, etc., Association v Augustin, 3 Mo. App., 123 103-119 Stohr V San Francisco, etc., Society, 83 Cal., 557 31 Strohenv Association, 115 Pa. St., 373 124-12S Sturges V Crowninshield, 4 Wheat, 123 19 Stuyvesant V Hone, 1 Sandf., (N. Y.,) 419 126 Sullivan V Lewiston Institution of Savings, 56 Me., 507 .'.39 Sunbury, etc.. Association v Martin, 1 Luz., L. Reg., 147 86 Swentzel V Penn. Bank, 23 Atl. 1 Rep., 405 39 T Tanner's Appeal, 95 Pa. St., 118 83 Tascottv Mutual, etc.. Association, 37 111., App., 274 75 Taylor v Collin.s, 46 L. T., Rep., N. S., 168 63 Texas, etc.. Association v Kerr, 13 S. W. Rep., 1 20-66 Third Ward, etc.. Association v Lotze, 11 Bull., 285 9 Thompson Y Gillison, 38 S. C, 534 108 Thompson v Ocmulgee, etc.. Association, 56 Ga., 350 130 Tosh v North British, etc.. Society, 11 App., Cas., 489 138 Twin-Lick Oil Company v Marbury, 91 U.S., 587 43 Tyrrell, etc., Association v Haley, 30 Atl., R., 1 63-82 TABLE OF CASES. XXV Page. Tyrrell, etc., Association v Haley, 139 Pa. St., 476 92 Tyrrell, etc., Association v Haley, 139 Pa. St., 657 73 u Union, etc.. Association v Masonic Hall Association, 2 Stew.,389.. 04-55-81-101 Uniontown etc., Association's Appeal, 92 Pa. St., 200 126 Valley Bank, etc., Institution v Savings Society, 28 Kan., 423 119 Vann v Fayetteville, etc., Association, 75 N. C, 494 77 Vanneman v Swedesboro, etc, Association, 15 Stew., 263 155 Vermont, etc., Company v Whithed, 49 N. W. Rep., 318 105 Vos V Cedar Grove, etc., Association, 9 Bull., 194 56 w Walker V British, etc.. Association, 21 L. J. Q. B., 257 45 Walker v General Mutual, etc.. Society, L. R., 36 Ch., Biv., 777 786-66 Walton V Edge, L. R., 10 App. Cas., 33 69 Wangerien v Aspell, 47 Ohio St., 250 18-20-55 Washington, etc.. Association v Beaghen, 27 N. J.. Eq., 98 SS- 125-126 Washington Association V Creveling, 10 Vr., 465 155 Waterlow v Sharp, L. R. 8 Eq., 501 114 Watkins v Building Association, 97 Pa. St., 514 87 Watkins v Workingmen's, etc.. Association, 10 W. N. C, 414 l 87 Watkins V Workingmen's, etc., Association, 97 Pa. St., 514 95-97 Watson V Aildn, 55 Tex., 536 105 Waverly, etc.. Association v Buck, 64 Md., 388 95-103 Weise v San Francisco, etc., Society, 82 Cal., 646 31 Weiss' Appeal, 5 W. N. C, (Pa.,) 42S 125 West Winstead, etc.. Association v Ford, 27 Conn., 282 103-153 Whilden V Broomall, 1 Del.,(Pa.,) 142 86 White V Mechanic's, etc.. Association, 22 Grat-, 243 .73-85-103-121 Wiggins' Appeal, 100 Pa. St, 158 83 Wilkowskiv Hall, 95 Am., Dec, 374 91 Wm. Tell, etc, A.ssociation, 39 Pa. St., 137 103 Williamson V Kokomo, etc.. Association, 89Md.,389 16-17 Williar v Baltimore, etc., Association, 45 Md., 546 77-103-105 Wilson V Tucker, 3Stark., 154 45 Wilson's Case, L. R., 12 Eq., 521 110 Winchester, etc , Association, V Gilbert, 23 Grat, 787 38-73-95-98 Windibch v Korman, 5 Bull., 364 93 XXVI TAELE OF CASES. Page. Windhorst V Building Association, 7 Bull., 29 156 Winget V Quincy. etc., Association, 128 111., 67 17-25-40-140 Windsor v Bandel, 40 Md., 172 121-128 Winterer V Building Association, 44 L. I., (Pa.,) 122 38-60-98 Withers V Baird. 32 Am., Dec, 754 91 Wittman V Building Association, 7 W. N. C, 80 65-128 Wolbach V Lehigh, etc., Association, y4 Pa. St., 211 83 Wolbach V Lehigh, etc., Association, 4 W. N. C , 157 156 Wood V Hoskin, 63 Wis., 15 158 Wood V Union Gospel, etc.. Association, 63 Wis., 9 158 Woodman V York, etc., R. R. Company, 50 Me., 549 52 Wright V Deley, 4 H. & C, 209 66 z Zabriskie V Hackensack, etc., Company, 18 N. J., Eq., 178 19 INDEX. Abstract of title should be furnished 81 Abstracter may be an officer 42 Acceptance formal, of resignation of director unnecessary 48 Acconnt, how stated when association in liquidation 120n Acknowledginient of mortgage, who may take 90,91 Actual notice to association of subsequent incumbrance, effect of 126 Advancement on shares is a loan 76 n, 77 n Agents, directors as 38, 89 Directors when may delegate to- ^"41 Contract of, when may be rescinded 49 When may be removed — — 49 Liability of association for acts of 53 When may delegate powers 53 n Powers of, should be defined 52 general Powers to bind association 52, 53 Special how far may bind association 53 Agreement, see contract. Unanimous, stockholders may wind up by 119 To take shares, nature of 10, 11 To take shares, not partnership 11- Building form of 226 To waive liens form of 233, 234 Amendment, of charter by legislative authority 18 When legislature may amend 18 Limits of legislature power to amend — 19 Mode of amendment 19 Of by-laws 01,32,33 Of resolutions 32 Amonnt payable on foreclosure, natural and logical rule 96, 97 Recoverable on foreclosure under the English rule 94 Recoverable on foreclosure under rule of "possible duration " 98 Recoverable on withdrawal 66 To be paid on withdrawal 65, 69 XXVII XXVIII REFERENCES TO PAGES. Application for loan 79 For loan, form of 170 Of payments 84 Of stock payments by borrower, eilect of b8 For membership, form of 158 Appraisers cannot delegate powers... 53 n Sealed report of 46 n Re port, form of 184- May beoflScers 42 Appraising committee 3, 46, 80 Arbitration, by-laws may provide for 29 Articles of association, see charter. Of incorporation 11, 12 Assessment on stock 127 Assets, what are 89, 126 n To be distributed when 121 How distributed 129 Should be equally distributed 60 Distribution of, upon dissolution 120 Assignment of stock without transfer on books, effect of 70 Of stock as collateral security 85 Form of 193 Of shares as collateral security, effect of 85 For creditors -. 123 For creditors does not prevent judgment 123 Association plan of 5 Assigned, shares cannot be credited on loan 88 Assigning mortgages, effect of 115 Assignment of mortgage Ill, 112, 113 Attorney, duties of 45 Liability of 45 Auction sale of money 74, 77 Auditing Committee, appointment of 47 Character of - 47 Report of impeachable when 47 Avoiding usury. See Usury Bailee, Treasurer is only 45 Bank, account, overdrawing 114 Check, form of • 225 Banking, Association should notengage in 50 Bidding - - 78 For preference 74 Bill to foreclose mortgage, fines do not stop upon filing 101 REFERENCES TO PAGES. XXIX Bond, Secretary and treasurer should give 36,47 Duty of directors in regard to 47 Sureties responsibility of, how ascertained 47, 48 Sureties discharge of 48 liability of 48 Effect of failure of surety to read bond... 48 Form of 188, 200, 202, 211,231, 234, 235 Not void for uncertainty 83 Provisions of ^ 48,81 May be deposited as collateral security 112 Books, Inspection of by members 62 Borro"friiig, Illegal prior to 1874 in English societies without a rule.. 109, 110 Unlimited borrowing held ultra vires _. 109 When limit exceeded, directors liable 109 For illegitimate purposes not enforceable 109 For legal liabilities, enforceable 109 Borro'vv'ing member entitled to pro rata part of profits 60 Status of 71, 72, 73 n Selection of __ 74 Borrowing money by association ..107, 108, 109, 110, 111, 112, 113, 114 115 BorrOT^er, Member as 3 Liability of.... ..90, 127 Must pay interest during suspension 120 Not further obligated if association is unable to perform its contract 121 May set off against his mortgage 92 Defaulting, amount to repay 96,97 Repaying amount of repayment 96, 97 Cannot recover on mistake of law 98 Credit entitled to, on application of stock payments 125 Withdrawing, credit to be given 87 May pay off loan and retain stock 87 Not liable under his mortgage for debts unless so provided. 88, 89, 128 Liability of, for losses 89, 90 Cannot defeat loan as unauthorized 83 Borroirer's account when association in liquidation 120 n Building agreement, form of 226 Specifications, form of 227 Building Association. Origin of 1 Greenwich Union Building Society .1 Brookljm Building and Mutual Loan Fund Association 2 Definition of .. ..2 XXX REFERENCES TO PAGES. Building Association. General scheme of 2 Transfer of stock 3 Maturing of stock 4 Revenues of 4 Expenses to be incurred 4, 10 Officers to be selected 4 Compensation of officers 4 Serial, plan of 5 Value of shares _ 5 Permanent, plan of . 6 Organization of 9 Agreement, preliminary 10 Contract, preliminary 10 May enforce stock subscriptions 10 Use of seal ..20 Modified type of corporations 21 DifEerent from ordinary corporations 23 Illegal to hold stock in another corporation 25 Cannot hold stock in another 25 Relation of stockholder to 21 Bound to lend to members 24 Estopped to deny membership 25 Power to enact by-laws ..28 Power to amend by-laws 31 Contract of, how signed 41 Relation of officers to 49 General powers of , 50 to have common seal 50 to contract 50, 52 to hold real estate 50, 56 to sue and be sued 50, 53 to make by-laws 50 to compromise debts or remit fines 42, 55 to loan money 55 to take mortgages 1 55 to borrow money. 107, 108, 109, 110, 111, 112, 113, 114, 115 Has incidental powers as are necessary 50 Should not engage in banking 50 Should not invest in securities not contemplated by statute 50 Estopped to deny ultra vires acts when 51 Not dissolved by ultra vires acts alone , ... 1.51 Contracts through officers and agents 52 How far bound by special agent 52, 53 Power of general agent to bind 52, 53 Liability for agent's acts 53 Complaint by, allegations of 63, 54 REFERENCES TO PAGES. XXXI Bailding Association. Cannot traffic in notes 55 When may issue stock to another corporation 56, 57 May sue member for dues 63 Should make loans 74 May sue upon either bond or mortgage 83 May borrow for authorized purpose 109,114 Must repay unless lender knew purpose was unauthorized. .112, 114 No power to sell its mortgages 116 Unable to perform contract, borrower not obligated further 120 When must retire stock 121 May sell pledged stock as against purchaser 124 Consolidation of 129 Character of 132 By Bidding 74 By-Laws. May be amended by directors 28 Notice of amendments should be given 28 Character of notice 28 Member not bound by, without notice 28 Association has power to amend 31 Having retroactive effect, apply fully unless vested rights are impaired 33 Mode of amendment, as prescribed must be followed 33 Stockholders adopt 11 Charter should not invade 17 Selection of committee to frame 27 Report of committee, time and place of hearing 27 Character of, should be well understood 27 Each shareholder should have notice of 27, 62 Definition of - 28 Power of association to enact 28 Power to enact resides in stockholders 28 May provide for amendment by directors 28 Notice of amendments should be given 28 Character of notice 28 Member not bound by amendments without notice 28 When acted upon and enforced are binding ..28 Must be reasonable 29 Must not be contrary to public policy 29 Nor attempt to oust jurisdiction of courts 29 May provide for arbitration , 29 Must be consistent with articles of incorporation and statute 29 Cannot provide for unreasonable fines 29 Cannot compel stockholders to offer premium for priority of payment after maturity of shares 29 Member cannot deny signing by-laws after enjoying benefits. ..29 n XXXII REFERENCES TO PAGES, By-JLaws. Requiring member to sign an obligation to obey are directory 2^ Are part of contract between association and member 30 May be examined to determine wlien mortgage contract terminated 30 Defining duties of secretary, part of surety's contract 30 Construction of, must be fair 80 Consisting of several distinct and independent parts, one may be void and the others valid ...30 If waived by association, member violating them cannot com- plain 30 Member holding a greater number of shares than allowed by by-laws, but not by statute, cannot defend against a claim thereon . » 30^ A loan not in conformity with by-laws, but under an express statutory power, is not void . .30 Association has power to amend -.31 May be amended so as to afEect future benefits but not vested claims - — . . --31 Illustrations of rule -- 31, 32 n Amendments having retroactive effect, apply fully unless vested rights are impaired 32 Resolutions cannot be passed so as to impair vested rights 32 Unwritten regulations when acted on will govern if reasonable-. 33 Mode of amendment as prescribed must be strictly followed 33 Should not be incorporated in charter 33 Should be kept distinct from rules 33 Provisions of by-laws 33 Manner of election of officers and time of holding to be pre- scribed by by-laws — 36 Should fix date of general meetings of stockholders.... ^...37 Should provide for call of special meetings 37 Manner of election of officers as fixed by by-laws to be strictly observed 48 Should provide for removal of officers , 49 Power of association to make . — --50 May provide for custody of seal 51 Member after enjoying benefits cannot question legality of 63 Should provide for liability of withdrawing member 67 Construction of, concerning withdrawal 69 Should provide for penalty for failure to take loan 74 Should regulate fines - -.101 Form of - 165 California Associations 144 Call for special meeting 37 Cancelling stock, effect of 131 REFERENCES TO PAGES. XXXIII Certificate of stock, form of 165 How issued 13,24, 36 Cessation of all corporate acts and enterprises does not dissolve the Association ._ - • 119 Change of permanent to serial 130 Serial to permanent ..130 Character of building associations 133 Charter. Preparation of 11,12, 13,14,15 Signing of 12, 13 Importance of 14 Legal status of signers 14 Must adhere to statute - --15 General adherence to statute sufficient 15 Construed by patent intent 15 Corporate objects to be clearly specified 15 What constitutes charter ..15, 18 Charter amendable to the constitution 15 n Relations created by the charter 15, 16 Effect of charter exceeding legislative authority 16 Effect of failure to strictly comply with statute 16 Strict compliance with statute not necessary 16 Defects in oranization cannot be collaterally attacked 16, 17 Effect of defects impairing legality of association 16, 17 State may withdraw charter for exceeded powers 16 When courts may interfere with exceeded powers — 17 Corporate functions not enlarged by assuming unauthorized powers 17 Charter should not invade by-laws 17,33 Construction of, is one of intent 17 Amendment by legislative authority ..^ — 18 When legislature may amend 18 Limits of legislative power to amend 19 Mode of amendment 19 Impairment of contract... 19 n Mode of amendment provided in charter must be followed 20 n By issuance of charter, association is a corporation .-..21 By-laws must be consistent with — 29 Providing for removal of officers 48 When may be annulled — 51 Power to forfeit in state 119 Form of, by articles of association - 159 Form of, by special enactment 163 Collateral attack, when acts ultra vires are subject to 55 Collateral Security, assignment of shares as 82 Form of. 198 Mortgages and bonds may be deposited as ..Ill, 112 XXXIV REFERENCES TO PAGES. Colorado Associations 143 Compensation of officers .• 4 Committees 41, 42, 47 Complaint to recover on withdrawal, what must show 65 By associations, allegations of 53, 54, 83 To foreclose mortgage, fines do not stop upon filing 101 Compromise of debts 42, 55 Of debts in good faith, will not be set aside 55 Computation as to amount upon voluntary repayment 94 Of amount recoverable on foreclosure under rule of possible duration _. 93 Consolidation of building associations 129 Constitution, charter amenable to 15 n Construction of by-laws must be fair .30 By-laws consisting of several distinct and independent parts, one may be void and the others valid ...30 Of by-law concerning withdrawal 69 Of charter, one of intent 17 Conting^ent fund 7 Continuous default, when averred 54 Contr ct. To take shares 10, 11 With married women 23 By-laws are part of, between association and member 30 Mortgage contract, by law may be examined to determine when terminated 30 By laws defining duties of secretary, part of sureties' contract 30 Of association, how signed _ . — 41 Of agent may be rescinded, when.. >. . 49 Power of association to malse c50, 53 Requiring seal 53 Misnomer of association in, effect of 53 To insure, breach of 84 n Co-operative banks 135, 139 Form of mortgage of — 216 Corporation. Relation of stockholders to 21 Association cannot hold stock in another _ 25 When stock may be issued to 56, 57 Corporate acts beyond corporate powers, void 50 name 11, 12 Courts. By-laws must not attempt to oust jurisdiction of 29 Cannot remove officers 48 Will not relieve against authorized forfeiture 48 When may interfere with exceeded powers 17 Covenants in mortgage 84 REFERENCES TO PAGES. XXXV Credit to be given withdrawing borrower, how ascertained 87 Creditors, assignment for - — 123 Cannot compel application of stock on loan 86, 125 Of association must be paid before members 126 Members withdrawing are 65 Entitled to be paid first -- 124 Members may be 60 Daytou Mutual Home Association 136, 137 Mortgage of, form of - 217 Death of stockholder 26 Dissolves membership 26 Of stockholder does not dissolve association 119 Debtor, member is to association 23 and n, 63 Debts, compromise of 42, 55 Liability of borrower for 127 Must be discharged before division 121 Liability of borrower for, under his mortgage 88, 89, 128 Deed, Trust, form of 194 Defaulting borrower amount to repay 96,97 Member may be sued on bond or mortgage 82 Member entitled to share in profits ..122 Member, disposition of 71 Member, tender by 54 Member cannot transfer stock.. 70 Default of other members does not relieve one 59 Deduction of premium 134 Defects impairing legality of association — 16, 17 In organization cannot be collaterally attacked 16,17 Definition of building association 2 Of usury 103 Delaware associations 140 Delegation of duties to agents by directors 41 Of powers by appraisers 53 n Delinquent officers, fines against 99 Deposits authorized, rights of depositors over members 113 Devisees as members 25 Directors. To be selected.... 4 Should keep within corporate powers 25 Illegal action of, may be restrained by stockholders 25 May amend by-laws, when 23 Cannot defeat supreme powers of stockholders assembled in general meeting 36 Should furnish stockholders with copy of report of association... 36 XXXVI REFERENCES TO PAGES. Directors. Meetings of 87 Have supervision and management 38 As agents and trustees -.38, 39 Duties of - 39 Liability of For fraud 89 For gross negligence - 39 For ultra vires acts 39 For misapplication of funds - 39 Not liable for acts of co-director when not present 39, 40 Not liable for mistake in opinion .39,40 Rule for guidance of 40, 41 Minutes of meetings 41 Powers of 41 Contracts of 41 Right to delegate to agents 41 Personally interested, incompetent to vote - 42 Cannot speculate in funds 42 Cannot purchase property for resale to association at a higher figure - 43 Cannot make secret agreements for their own profit 42 Duty in granting loans - -> 42 May remit fines or compromise debts 42 Term of election of 42, 43 Percentage of value to be loaned in discretion of 46 May appoint executive committee 47 Should require bond, when - 47 Duty of, in regard to bonds 47 Election of, as prescribed by by-laws, to be strictly observed 48 Resignation of „.. - 48 Cannot be removed by stockholders - — 48 Cannot be removed by courts 48 May remove agent holding at pleasure 48, 49 May remove agent under contract, when 49 Removal of, should be provided for in by-laws 49 Should understand scheme of association 51 Should make equal distribution of assets 60 Liability of, for distributing profits contrary to law 60, 62 Should not invest funds to defeat withdrawals 68 May give dividends to stockholders shown by the books 70 Grant loans on appraisement 80 Dissolution. Ultra vires acts alone do not work 51, 56 Rights of withdrawing members on 68, 69 Dues cease upon 81 Upon maturity of all stock 118 Method of 119 REFERENCES TO PAGES. XXXVII Dissolution. Neglect to elect officers does not dissolve association 119 Cessation of all corporate acts and enterprises does not dissolve. 119 Non user of franchise does not dissolve - ..119 Insolvency of association does not dissolve 119 Death of stockholders does not dissolve 119 May be by unanimous agreement 119 Agreement of 122 Tosuspend and close up business is not dissolution 119 Upon agreement must be unanimous 119 n Distribution of assets upon .- ..120 Appointment of receiver operates as dissolution as to pa3'ments-120 If association is unable longer to perform its contract it is in effect dissolved as to borrower 121 Dividends, How credited 121, 122 May be given stockholders shown by books 70 Division of assets 121, 129 of profits 7 of profits in serial 122 Distribution of assets 129 of assets upon dissolution 120 Dnes are partial payments on stock 24 Payment of at secretary's place of business when valid 63 Payment of, to authorized officer , 63 Suit for, by association 63 Cease on appointment of receiver 120 Cease if association dissolves before maturity ..81 When payable 36 Payable to maturity ..81 Payable as stipulated 81 Dnties of directors 39 of president 43 of vice-president .43 of secretary 43 of treasurer 44 of attorney .45 Election of officers, manner of to be strictly observed 48 of directors, term of 42, 43 Embezzlement, when secretary or treasurer guilty of 49 Enabling statute, powers conferred by 83 Engllsb societies, see borrowing, permanent society 6 Terminating society 6, 118 Entrance fee prerequisite to membership 21 XXXVIII REFERENCES TO PAGES. Estoppel. Members estopped to deny incorporation 25 One receiving membership benefits, estopped 25 A ssociation estopped to deny membership 25 Embezzling officers estopped to deny corporate existence . 49 Association's right to contract. ,... . . 51 Of association to deny its right to make contract ..51 When member estopped to deny... Member when estopped to deny legality of by-laws 62 Borrower cannot defeat loan as unauthorized 83 Association estopped to allege want of power to borrow for legitimate purposes 112 Association cannot defeat recovery of money borrowed as applied to unauthorized purposes, unless lender knew of it 112 Exclnsive right to name 12 Executive committee, appointment of .47 Committee, duties of 47 Committee, powers delegated to 41 Expenses to be incurred 4, 10 Expert accountants selected as auditors 47 Failure to transfer stock on books, effect of 70 Fees of appraising committee 46 n Final division and settlement, when required 121 Fines. Amount must be reasonable _ 29, 100 Delinquent cannot be fined twice for same offense 29 Must be provided for in unambiguous language 34 n Directors may remit 42 Covenant to pay enforceable 84, 100 Necessity of 99 Against delinquent oflScer 99 May be recovered as stipulated damages 99 Without statutory authority, not enforceable 100 Can only be collected from members _ 100 May be charged against land 101 Stop after decree of foreclosure 101 Do not stop on filing bill to foreclose 101 No interest on _ 101 After decree part of principal 101 Are lien on stock 101 Foreclosure of Mortgage. Just computation ditiicult . 93 Amount recoverable under the rule of "possible duration" 93 English rule 94 American modification 94 Uncertainty of above rules 95 The natural and logical rule 96 REFERENCES TO PAGES. XXXIX Forfeitores. Must be created by unambiguous language 34 yiiould be omitted when --34 Must be autliorized by charter or statute _ --71 In declaring, law must be strictly complied with 71 If authorized, courts will not relieve against 71 No notice is necessary unless prescribed 71 Forfeiting membership, effect of 71 Forfeiture of charter, power instate 119 Stockholder has no power to sue for forfeiture of charter. 119 Franchises not forfeited by agreement to suspend and close up business 119 Forms. Preliminary agreement for incorporation 1-^8 Application for membership 158 Charter 159 Special act of incorporation - 163 Of stock certificate -165 Of by-laws - 165 Of application for loan 179 Of appraiser's report - 184 Of rules 185 Of mortgage note - — 187 Of bond 188, 200, 203, 311 Of mortgage 139,206,313 O f collateral transfer 193 Of stock note - 194 Of trust deed - 15>4 Of insurance clause 199 Of Dayton Mutual Home Association mortgage 217 Of co-operative bank mortgage 219 Of stock register 224 O f warrant - -- 235 Of bank check 225 Of building agreement — 226 Of building specifications 227 Of indemnifying bond ^ 231 Of waiver of liens - • 283,234 Of bond of secretary , - 234 Of bond of treasurer 235 Of resolution to borrow 115 Franchise, non user of does dissolve 119 Not forfeited by agreement to suspend and close up business. ..119 Fraud, liability of director for 39, 40 Fraudulent satisfaction of mortgage, relief for 98 Funds, misapplication of, liability of directors for 39 XL REFERENCES TO PAGES. General agent, powers to bind association 52, 53 General Meetings. Supreme power in management vested in stockholders assembled in general meeting 36 Directors cannot defeat this power. 36 When they should occur 36 Date of, should be fixed by by-laws 37 When shareholder entitled to personal notice _ 37 Unless held pursuant to notice, of no validity 37 Must be held in the locality of the shareholders •. 37 Special or unusual matters require notice -37 Acts of majority present, binding.. 37 Objects of 38 Gross negligence, liability of directors for 39 Guidance for directors 40, 41 Heirs as members 25 Horizontal premiums 78 Idiot cannot be member 22 Illegal action of directors may be restrained by stockholders 25 Illinois associations .' 140 Implication, name acquired by 11 Implied powers _ 52 to borrow money 113 of association to take mortgage 55 Incapacity of agent, contract may be rescinded for. 49 Incidental powers, association has ...50, 53 Incorporation, averment as to 53 Form of special act for 163 Form of agreement for 158 By letters patent ' 13 By special legislative act 12, 13 One receiving membership benefits estopped to deny ..25 Members estopped to deny 25 Right to deny in the stats . 25 Indemnifying bond, form of 231 Indiana Associations ^ 144 Infants as members „ 23 Inspection of books by members... 63 Insolvency does not dissolve association 119 Insolvent association should have receiver. 123 Officer of, cannot discharge his indebtedness by his stock 49 Rights of withdrawing membersof 67 Insurance, Covenant to pay, enforceable 84 Breach of contract to carry 84 n REFERENCES TO PAGES. XLI Carrying by borro'wer -- — l''"^ ^ Clause, form of - - - 1^^ lOTTR Associations 1^^ .Interest, None on fines - - 101 Ceases on appointment of receiver 130 Cliarges, how fixed by officers 106 Illegal cannot be recovered 105 Usurious measure, of damages on recovering back 105 Usurious, may be recovered back 105 Usurious, Refunded clears of taint 105 May be charged on the principal without regard to the weekly or monthly reductions... — 104 Payable during suspension of business 120 Should be on the sum advanced... - 104 Payable weekly or monthly not usurious ..104 Not collectible on premium or interest 80, 105 l^nTCsting member liability for losses 89,90 May be without borrowing... 63 Investor, liability of 00> 137 Issue of stock, see Re-issue of stock 56, 57 J nd j^nient against association binds shareholders 54 Junior Incumbrancer may compel application of stock payments on loan .- - 80, 88, 124, 125 Must notify association of his claim 126 "Kansas associations 143 Kentucky, statutory interest allowed 106 n I^eases, elfect of 91, 93 Legal status of member 59 of stockholder defined 66 X«egislature may amend charter 18 lienders to associations entitled to payment over members Ill Where society exceeds statutory limit, remedy of Ill I^etters patent, incorporation by.._ 12 I>iability of attorney 45 Of association foragent's acts - 53 Of directors 39 Of secretary - --44 Of treasurer - 45 Of- withdrawing member 66, 128 On stock, measure of - 90 Of borrower for debts of association under his mortgage.. 88, 89, 128 Of investor 90, 127 Of association must be discharged before division 121 XLII REFERENCES TO PAGES. Liiability. Of borrower 90, 127 Of stockholder 90, 127 fiien on stock, fines are 101 Waiver of, form of 233, 234 lioaii. Not in conformity with by-laws but under express statutory power, not void 30 Duty of directors in granting 42 Per centage of value to be loaned 4& Association has power to make 55 Duty of association to make -74 Advancement on shares is - — 77 n Ap pi ic ation for 80 Note or bond, provisions of 81 Mortgage, provisions of _. -- . 81 To outsider not grantable unless authorized 88 Cannot be defeated by borrower as unauthorized 83 To married women 83 Shares as collateral security for 85, see form, 193 Payments on stock not ipso facto payments on .-75 Creditor cannot compel application of stock on S& Applications of stock payments are compellable by junior incumbrancer, or purchaser, or surety - - ..86,88 Withdrawing borrower may pay off and retain stock 87 Assigned shares cannot be credited on 88 Leases for 91,92 Amount payable on foreclosure -.93, 94, 95, 96 Amount payable on voluntary repayment - 96, 97 Interest should be charged on the sum advanced 104 Premium only enforceable against members .'.-105 Not paid at one time, but receiving legal interest, not usurious.. 105 Form of application for - 179 Method of - 133, 134, 135, 136 liOans, character of security for 3 Stock 3 Mortgage 4 liOSSes, liability of investor and borrower for 89,90 Liability of borrower for . 127 Ulaine Associations - 141 Majority acts of, at meeting, binding - 37 Iflaking loans - —80 Malfeasance of agent, contract may be rescinded for 49^ Manner of withdrawal - 64. REFERENCES TO PAGES. XLIII lIKarried. woman as member. Loans to . .22 .83 Loans enforceable against husband of 83 Marish ailing of assets ^24 When doctrine of, applies 126 Maryland, associations. - 1^^ Massachnsetts associations 139 Matured value of stock not recoverable on withdrawal 66 Ifatnrity of series 1^1 Retiring of stock before 68 Of stock premium chargeable to, only 79 Of stock in serial - - 122 • Stockholders may wind up before - H^ Measure of Damages on recovery of usurious interest 105 Of liability on stock 90 Member. See Stockholders. M ay borrow - 3, 23 May withdraw 3, 8, 24 May transfer stock - - 3 M ay pledge shares 3 Pays entrance fees 3,21 Should pay additional cost when 6 How constituted 10 Relation to corporation -- 21 Relation to state — 21 Entrance fee prerequisite of membership 21 Non compos cannot be a member -- 22 Becomes a member by subscribing for stock 22,30 Not compelled to accept illegal conditions 22 Married women and infants as members .22 Contracts with married women 22 Purposes of membership - 22 Purposes not material - 23 Is debtor to the association 2o and n, 59, 63 Jlntitledto be credited with profit 23 Association bound to lend to members 24 Withdrawal of, terminates membership 24 Issuingof pass book - - 24 Payments, how credited on pass-books 24 Pass books prima facie evidence of membership 24 Procedure when pass-books are lost 24 Certificates of stock how issut^d 24 Rules concerning when upheld 24 Estopped to deny incorporation 25 Illustration of rules ^ 25 n XLIV REFERENCES TO PAGES. Member. Rightto deny incorporation in the state 25 One receiving membership benefits estopped 25, 29 n Directors should lieep within corporate powers 25 Stoclvholders may restrain illegal action of directors 25 n, 39 Association when estopped to deny membership 25 Death of stockholder ..26 Death dissolves membership 26 Heirs or devisees as members _ 26 Becomes such by owning stock without signing any agreement 30 Not bound by amendment of by-laws without notice 28 By-laws requiring members to sign obligation are directory 29 Bylaws are part of contract between member and association 30 Violating by-laws cannot complain if waived by association 30 Cannot complain if holding shares contrary to by-laws, but not contrary to statute 30 Has but one vote 38 Not relieved from duties by acts ultra vires 51 Effect of tender when sued 54 Default of other members will not relieve him 59 May be shareholder and creditor 60 Pro rata interest in reserve fund 60 Borrowing entitled to pro rata part of profits 60 After enjoying benefits of by-laws cannot question legality of 62 May inspect books of association . 62 May invest without borrowing 63 Formerly denied in England _ _. 63 May be sued for dues 63 Should give written notice of withdrawal _. 64 Member withdrawing is creditor of association 65, 68 Amount member may recover on withdrawal 65 Legal status of withdrawing, defined 66 Withdrawing, liabil ityof ..66 Withdrawing not bound by new rules. 66 Withdrawing may sell his interest 67 Withdrawing from insolvent association, rights of ..67 Withdrawing must show funds in treasury to enforce demand... 66 Defaulting cannot transfer stock 70 Forfeiting membership, effect of 71 Defaulting, disposition of 71 Borrowing, status of 71, 73, 73 n Borrowing, selection of 74 Not deprived of ordinary benefits by mortgage in ordinary form. 82 Should be accommodated before outsiders on loans 83 Cannot be compelled by creditor to apply stock payments on loan 86 Withdrawing borrower's manner of repayment 86 REFERENCES TO PAGES. XLV Member. Withdrawing borrower, credit how ascertained . 87 Losses, liability for 89, 90 Liability on stock 90, 127 Fines only collectible from members 101 Lenders to association entitled to payment over — 111 Defaulting entitled to share in profits 123 When may compel settlement 124 Cannot participate in assets until creditors are paid 126 Memberi^hip fee 3 Form of application for 158 Method of loans inS, 134, 135, 136 Of charging premiums 75,76,135 Of dissolution 119 Meetings. See General and Special Meetings. Of directors 37 Michigan associations 140 Minimnm premium 78 Minnesota associations 142 Minntes of meetings _ 41, 47 Misapplication of funds, liability of directors for 39 Misnomer 11 Mississippi associations 142 Missouri associations 142 Mistake of law 98 Mode of Amendment as prescribed must be strictly followed.. 33 Of charter 19 n Money of association should be loaned _ 74 Mortgage Foreclosure, See Foreclosure of Mortgage. Loans -.-.4 Association has implied power to take 55 Association has no power to sell 116 Assignment effect of 116 Registration of -.91 Acknowledgment of 90 Of borrower does not secure liability for debts of association, unless so provided 88, 89, 128 Not void for uncertainty... , 83 May be deposited for collateral security Ill, 112, 113 In ordinary form does not deprive member of benefits ..82 Provi.sions of 81 Satisfaction of 92 Release of by association when there is a second mortgage 88 Preparation of 84 XLVI REFERENCES TO PAGES. Mortgage Foreclosnre. Satisfaction of by president 98 Note, form of , 187 Form of 189, 206, 213, 219 Mntnal Home and Savings Association 136, 137 Form of mortgage of 217 Name 11, 12 Nebr a !^ka associ ations 144 K^ecessity of fines. •. 99 Jfeglect to elect officers does not dissolve association 119 Negligence gross, liability of director for 39 New Hampshire associations ...140 New Jersey associations 139 Bond 211 Mortgage 213 New Yorlt associations _ 138 Non compo!^ cannot be member 22 Non nser of franchise does not dissolve 119 North Carolina associations 141 North Dakota associations I44 Notary Public, when disqualified 90,91 Note, provisions of 81 Form of mortgage note 187 Form of stock note I94 Notes, association cannot trafllc in 55 Notice, Of amendment of by-laws should be given 28 Character of notice.. .•. 28 When shareholder entitled to personal notice of general meeting. 37 General meeting must be held pursuant to notice ..37 Required for special meeting 37 For special meeting, how served 37 Of withdrawal should be written __ 64 Of withdrawal, how served 65 Notice of forfeiture not necessary unless required 71 Of junior incumbrancer to association 126 Recording subsequent incumbrance, is not notice 126 Actual, efliectof 126 To stockholders, when not necessary 13 Nnl tiel corporation, plea of 53 Office, association should have .._.36 REFERENCES TO PAGES. XLVII Officers. Compensation ..... - - — * To be selected - - * Stockholders elect H) 35 Consist ordinarily of president, vice-president, secretary, treasurer and attorney , 35, 36, 42 Election of, by ballot 36 Election to be provided for by by laws 36 Secretary and treasurer should givebond 36 May include abstracter and appraisers 42 Manner of election as fixed by by-laws to be strictly observed.. -4» Cannot be removed by stockholders 48 Cannot be removed by courts --48 Removal of, should be provided for in by-laws 49 Cannot use position for personal benefit 49 Relation of ofllcers to association 49 Liability of, in distributing funds 60, 62 Fines against delinquent 99 Rules for, in fixing interest charges -.106 Neglect to elect, does not dissolve association _ 179 Oliio associations 137 Opinion, directors not liable for mistake in 39, 40 Oregon associations 144 Organization 9 Promoters of association 9 Services of promoter, proof of — 9 n Preliminary contract 10 Expenses of 10 Stockholder, how constituted 10 Subscription for stock 10 Stock subscription for 10 Association may enforce stock subscription 10 Articles of incorporation 11, 12 Preparation of articles of incorporation 11, 12, 14, 15 Preparation of charter of incorporation . 12, 14, 15 Name 11, 13 Signing of articles of incorporation 12 Charter, preparation of 11, 12, 13, 14, 15 Registration of articles of incorporation 13 Shareholders adopt by-laws 11 Shareholders elect officers 11 Certificates of stock 13 Defects in organization cannot be collaterally attacked 16, 17 Form of agreement for incorporation 158 Outsider, when may borrow 83 Overdrawing bank account 114 XL.VIH REFERENCES TO PAGES. Paid up stock, issue of , 60,'61 n Partnership 76 n, 77n Pass Book, issuing of 24,36 When must be produced on ■withdrawal ..6i) Prima facie evidence of membership 24 Procedure when lost 24 Payment of lenders to association before members 111 Of dues cannot be required except as stipulated 81 Of dues at secretary's place of business, when valid 63 Of dues ceases when association is in hands of receiver 81 Of dues should be to authorized officer 63 Payments. Application of 84 Credited on pass books 24 On re-assigned stock 87 On stock not ipso facto payments on loan 85 On stock application, effect of 88 Penalty for failure to take loan 74 Pennsylvania associations 138 Bond ■ , - 202 Mortgage 206 Per centage of value to be loaned 46 Permanent association, retiring stock in 121 Change of to serial ..130 Plan of 6 Perpetual succession 50, 51 Plea of nul tiel corporation 53 Pledging shares 3 Pledged stock cannot be withdrawn .- 69 Preminm charges 3 Stockholders need not pay for priority of payment of matured shares -.29 Paid as a preference 74 Methods of charging 75, 76 When usurious. 76, 102, 103 When not usurious 77, 78 notes Have general legislative authority.... 77, n, 104 Auction premiums when must be complied with 77 Fixed unchangeable 78 Horizontal or uniform 78 Minimum premium 78 Chargeable to maturity only 79 One premium only chargeable 79 Interest not chargeable on 80, 105 REFERENCES TO PAGES. XLIX Prcminm. Not usurious as formerly - When authorized by statute, recoverable 103 n Effect of disregarding statute ^^^ Enforceable only against members l"^ Methods of charging 1^*' ^^^ Unearned ^'^^' ^*'^ Powers. _ When courts may interfere -with exceeded powers i* Corporate functions not enlarged by assuming unauthorized powers ......... -•- *"" Association has power to amend by-laws 31 Supreme power of management vested in stockholders assem- bled in general meeting **" Of special meetings ^'^ Of directors to remit fines or compromise debts 42, 55 Of courts to remove officers — -4S Of stockholders to remove officers 48 Of directors to rescind contract of agent 49 General powers of association "^ Tohave a common seal ^^ To contract ^^ To hold real estate ^50, 56 To sue and be sued ^^' To maki^ by-laws - ^^ Incidental association has such as are necessary ...50, 52 or agents should be defined • ^^ Of special agent • "" Of general agent ^2, 53 Delegation of, by secretary or appraisers 53 n To loan money ^^' To take mortgages '^^ When may issue stock to another corporation 56, 57 To borrow money 107, 108, 109, 110, 111, 112, 113, 114, 115 To sell mortgages ■^^"' Poirer of building associations to borrow money Act of Parliament 1874 HO' American authorities HI English authorities - ^^^ 1 1 «> Implied power. - '■'■'' Legislative intention 108 Necessary to meet demands for loans 108^ Necessary to pay off a series 107 Necessary to cancel matured stock 107 Remedy of lenders where statutory limit is exceeded HI To borrow for authorized purpose 114 Of state to withdraw charter lor exceeded powers 16- L, REFERENCES TO PAGES. Preference, bidding for 74 Preferential stocli, issue of 60 Preliminary contract 10 Preparation of articles of incorporation 11, 12, 14, 15 For loan 80 President. Should issue call for special meetings 37 Duties of 43 Should appoint auditing committee 47 Should make record cancellations 98 Profits, Division of 7 Division of in serial 122 Members entitled to be credited with 23 Promoter, services of... 9ii Provisions of agreement to take shares 11 Of mortgage 81 Of note or bond 81 Proxies, when may be used 38 and n Public Policy. By-lavrs must not be contrary to 29 Purchaser of property may compel application of stock pay- ments on loan . 86, 88 Purposes of membership 23 Quorum, how estimated 87, 38 Ratification of agent's unauthorized act, effect of 53 Beal Estate holding beyond power, effect of 56 Holding beyond power does not dissolve association 56 Power of association to hold 50, 56 Receiver, Appointment of, for insolvent association 123 Dues and interest cease on appointment of 120 Payments of dues, etc., cease when association is in hands of 81 Recording subsequent incumbrance not notice to association 126 Refusal of association to transfer shares, remedy for 70 Registration of incorporation 13 of mortgage^ 91 Reissue of stock 131 Relation of officers to association 49 Remission of fines 42, 55 Removal of directors 48 Of officers 48 •«» Of officers should be provided for in by-laws 49 Repayment by withdrawing borrower 86 Report of auditors, impeachable when... 47 REFERENCES TO PAGES. LI Reserve Fnnd, each member has pro rata interest in 60 Resignation of director 48 Resolution to borrow, form of 115 Retiring series 12 1 Stock before maturity . . 68 Retroactive Amendments of by-laws apply fully uuless vested rights are impaired 32 Reven nes of association _ 4 Rhode Island associations 141 Rules. Concerning issue of stock certificate 24 Needed by the association 33 May be amended as by-laws 33 Unwritten will govern when acted on, if reasonable 33 By-laws should be kept distinct from 33 For general guidance of directors 40, 41 Withdrawing member not bound by new rules 67 Form of 185 tSale of money by auction 74 Satisfaction of mortgage 93 of mortgages by president 98 Seal. Use of, by statutory corporations... 20 When seal should be attached 20 Any device or form will answer 20, 52 Common, power of association to have 50 Custody of - - - 51 Contracts requiring 52 Secretary. By-laws defining his duties part of sureties' contract.. 30 Should give bond _ 36 Receiving dues at his oflice 36 Duties of 43 Liability of 44 When guilty of embezzlement 49 Estoppel --49 May delegate power 53 n Payment of dues at place of business, when valid 63 Should enter notices of withdrawal 65 Form of bond of 234 Security, character of - 3 Securities, association should not take unlawful 50 Selection of borrower 74 L.II REFERENCES TO PAGES. Serial, division of profits... 123 Maturity of stock . 123 Change of, to permanent 130 Series, maturity of 121 Of stoclc, association may borrow to pay off 113 Service of notice of withdrawal -.05 Services of promoter, proof of 9n Set off, borrower entitled to - 92 Settlement, when member may compel 124 When required — 121 Sbares. See Stock Pledging 3 Shareliolders. See Stockholders. Sig^ning; of articles of incorporation .. 13 Special Agent, how far may bind association 53 Special legislative act, incorporation by 13 Special Meetings. Notice required 37 Call for, how made ^ 37 Notice for, how served 37 Power of 37 Acts of majority present, binding ..37 Specifications building, form of 227 State has power to forfeit charter _ 119 May annul charter, when 51 Powers of, to withdraw charter for exceeded powers 16 Status of borrowing member 71, 72, 73 n Statutes. By-laws must be consistent with 29 Eight of withdrawal usually defined by 64 Effect of failure to strictly comply with 16 Strict compliance with, in charter unnecessary 16 Statutory References. Alabama, 163 Arkansas, . 153 California,... 153 Colorado, 153 Connecticut, 153 Dakota, 153 Delaware - 153 Florida, 154 Georgia, - 154 Illinoia, -,. 154 REFERENCES TO PAGES. LIH Statntory References. .^^ Indiana, ^^^ lo^^' ;;i54 Kansas, ,_. ^ , 154 Kentucky, . Louisiana, -- — - ,_. -, . 154 Maine,, ^g^ Maryland, . Massachusetts, ' -.-154 Michigan, - ^^^ Minnesota, -- Mississippi, Missouri, ' Montana, — -- " " ikk Nebraska, " -[^k New Hampshire, - New Jersey, New Mexico, ; New York, North Carolina, ^,. 156 Ohio, ^_„ „ ..156 Oregon, ^^g Pennsylvania, Rhode Island, South Carolina, Tennessee, ^._ _, 15" ^«""^■ 157 Virginia ^^^ Wyoming, - Utah JJ; Washington, - West Virginia, - Wisconsin, - ^tock, dues are partial payments on • Transfer of Pledging of .- Maturing of Value of "^ Loans ' Subscription for.. V Association may enforce o/qr Certificates of ^'^' H Association cannot hold stock in another corporation 25 Become members by subscribing for 22 After maturity of, stockholders need not offer premiums for priority of payment — ~^- When may be issued to another corporation 56, 57 LIV REFERENCES TO PAGES. Stock. Preferential, issue of 60 Paid up, issue of 60, 61 n What may be recovered on withdrawal 66 Retiring of before maturity 68 Right to withdraw limited to present funds 68 Pledged cannot be withdrawn 69 Transfer of 69 Must be transferred on books 70 Certificates should be surrendered on retirement 70 Transfer of, effect on member's liability 70 Transfer cannot be made by defaulting member 70 Assignment of, as collateral security 85 Payments on stock not ipso facto payments on loan b5' Withdrawing borrower may retain and pay ofl loan 8T Value of, on withdrawal, how ascertained 8T Re-assigned payments on 87 Assigned cannot be credited on loan 88 Fines are lien on 101 Association may borrow to cancel 111 Cancelling, effect of 121 When to be retired 121 Maturity of 122^ Pledged may be sold as against purchaser 124 Assessm ent on 127 Certificate of, forra of 165 Reissue of 131 Form of stock register 224 Stockholders. How constituted 10, IS Adopt by-laws , 11 Elect officers _.ll When notice not necessary _ IS May restrain illegal action of directors 25, 51 Death of 26 Should have notice of by-laws 27, 63 Power to enact by-laws resides in .28 Need not pay premium for priority of payment after maturity of shares 29" Assembled in general meeting have supreme power 36 Should have copy of report of association 36 When entitled to personal notice of general meeting 37 General meetings must be held in locality of 37 Cannot remove directors 48 Cannot take advantage of acts ultra vires when 51 Bound by judgment against association 64 Liability of, not terminated by withdrawal 64 REFERENCES TO PAGES. LV Stockholders. Legal status of, defined 66 Shown by book, entitled to profit .-..70 Liability on stock.. 90, 127 Death of, does not dissolve association 119 Cannot maintain suit to forfeit charter 119 Account of, when association is in liquidation 120 n Stock register form of 224 Subscription for stock 10 Sait by withdrawing member, necessary allegations 66 To foreclose mortgage, constitution and by-laws not proper exhibits under Indiana Code _. 82 Maybe on bond or mortgage . 82 For dues by association 63 Sureties. By-laws defining secretary's duties part of sureties' contract 30 Sureties, Responsibilities of , how ascertained ....47, 48 Surety may compel application of stock payments on loans 88 Discharge of . 48 Liability of 48 Effect of failure to read bond 48 Surrender of certificate of stock 70 Suspension of business, borrower not relieved from interest during 120 Systems of loaning 133, 134, 135, 136 Tables 146, 147, 148, 149 Taxes, covenant to pay enforceable 84 Tender effect of, by sued member 54 Tennessee associations 139 Texas associations 144 Transfer. Of stock 3,69 Of stock, effect on member's liability 70 Of stock on books, effect of failure to 70 Cannot be made by defaulting member 70 Fee enforceable.. 70 n Shares, refusal of association to, remedy 70 Treasurer. Should give bond 36 Duties of 43 Warrant of, not negotiable 44 n Liability of 45 Is only a bailee 45 When guilty of embezzlement 49 LVI REFERENCES TO PAGES. Treasurer. Estoppel 4» Form of bond 236 Trustees, directors as 38, 39 Trust deed, form of 194 Ultra Tires, Unlimited borrowing is, in English societies 109 Acts, effect of 50,51 Liability of directors for • 89 When stockholder cannot take advantage of 51 When association estopped to deny its acts 51 When charter may be annulled for 51 Do nut relieve members from their duties 51 Do not of themselves end corporate existence 51 When subject to collateral attack 5^ Unauthorized transaction void 50 Unearned premium 135,143 Uniform premium '3'* Unwritten Kegulations. Will govern when acted upon, if reasonable 33 Use, name acquired by 11,12 Usurious interest, measure of damages on recovering back 105 Interest may be recovered back.. . 105 Refunded clears of taint 105 Charged against outsider 105 Not as formerly 102 When premium is not ''"''> 78 notes Usury definition of - 102 Not avoided by complicated transactions 103 Combination of interest and expenses at a higher than a legal rate is tainted with 102 If the arrangement makes higher than the legal rate it is 103 Avoided on the partnership theory 103 n When cost of money, not usurious -- 103,104 Interest payable monthly or weekly, not usurious 104 Charging interest on the principal without regard to weekly or monthly reductions, is not 104 A personal defense - 105 When loan not subject to 105 When premiums are usurious "^6, 77 n Value of shares -5 Of shares upon withdrawal, how ascertained 87 Of stock not recoverable on withdrawal 66 Per centage of, to be loaned - 4& Tested Rights, amendments of by-laws cannot affect 81 REFERENCES TO PAGES. LVIl Vice President, duties of.. - ---43 Voluntary repayment, amount of 96, J7 Repayment, under English Rule, computation for --94 Repayment, natural and logical rule for 96, 97 Repayment, rule as to computation for 94 Vote, member has but one - -..38 Waiver of liens, form of - - ~33, 234 Washington, D. C. associations 137 Warrant of treasurer not negotiable «•- 44 n or treasurer, form of. 225 West Virginia associations 14- W^inding up. Bee Dissolution Rights of withdrawing members on -68, 69 Stockholders may wind up by unanimous agreement 119, 1 22 Wisconsin associations - - 141 Witlnlrafving borrower, manner of repayment - 80 Credits entitled to- -- 6, 87 Not compelled to make application of stock -b7 Member of insolvent association, rights of 67 Liability of 66, 128 May sell his interest - 67 Rights of, against other members 68 Rights of, on winding up - 68,69 Not bound by new rules 67 Is creditor of association — 65, 66 Withdrawal. Of members - 3,8,64 Terminates membership ..-24 Should be attended with restrictions 64 Does not terminate all liability 64 Right usually defined by statute 64 "Written notice of, should be given _ 64 Notice of, how served 65 Amount payable on 65, 69 Amount recoverable on - -66 Limited to present funds 6b Directors should not invest funds to defeat 68 Pledged stock not subject to 69 When pass book must be produced 69 Wyoming assrociations 143 BUILDING ASSOCIATIONS. CHAPTER I. INTRODUCTION. Section 1. Origin of Building Section 3. General Schema. Associationg. Section 4. Diflerent Types. Section 2. Definition of Build- ing Associations. Section 1. Origin of Building Associations. The origin of building associations is involved in much doubt, and no practical purpose will be served in devoting much time to that line of investigation. The Earl of Selkirk is given the credit of founding the building association about the year 1809'. The Greenwich Union Building Society was its name, with the object of raising by monthly subscription a fund or capital to be laid out in building houses, and of dividing the same amono- members, under rules created in a deed of rules and reirulations". A mention of " building clubs " occurs ini Birmingham, England, in 1772. Some writers have given, their origin to Germany, connecting the frugal and accumulative dispositions of this people, probably, with the institution; 'Davis Building Society.' objects of this association as ex- *The author states at length the pressed in the deed. 1 (1) 2 BUILDING ASSOCIATIONS. but there is no authentic support of the claim.' The first building association in America is generally conceded to have been The Brooklyn Building and Mutual Loan Fund Asso- ciation.' However, the earlier associations found existence in the city of Philadelphia, about 1840; their spread was south and west. Frequently, they were put into operation as unin- corporated societies', flourishing in some states and failing in others. Generally they have become the subject of statutory creation and regulation, and being independent corporations, they have become vast depositories of savings and controllers of enormous property. Their influence upon economic affairs is far reaching and the multiplicity of their interests invites the attention of the lawyer, legislator and jurist. Sec. 2. Definition of Bnilding Association. The building association as now existing, is a private corporation, designed for the accumulation by the members of their money by periodical payments into its treasury, to be invested from time to time in loans to the members upon real estate for home purposes, the borrowing members paying interest and a pre- mium as a preference in securing loans over other members, and continuing their tixed periodical installments in addition, all of which payments, together with the non-borrower's pay- ments, including fines for failure to pay such tixed install- ments, forfeitures for such continued failure of such payments, fees for transferring stock, membership fees required upon the entrance of the member into the society, and such other revenues, go into the common fund until such time as that the installment payments and profits aggregate the face value of all the shares in the association, when the assets, after payment of expenses and losses are prorated among all members, which in leo-al effect, cancels the borrower's debt, and gives the non- borrower the amount of his stock. Sec. 3. General Sclieme. The periodical installment is called dues, and is a partial payment on the certificate of 'Endlich Building Associations 'Merrill v. Mclntire, 13 Gray, 157 ; p. 3. Baxter v. Mclntire, 13 Gray, 168; •Bibb Co. etc. Association v. Rich- Delano v. Wild, 6 Allen, 1 ; Atwood ards, 21 Ga. 592. v. Dumas, 149 Mass. 167. GENERAL SCHEME. 6 stock issued to the member'. When the share reaches face value, it is matured. Shares are commonly for $200.00, some- times for $100.00 or $500.00. Fines are imposed for failure to pay the dues at the fixed time. The stock is sometimes forfeited after a certain time for continued non-payment of dues. AVhen shares of stock are assigned by a member to any person, they have to be transferred on the books, and it is usual to charge a small fee for that trouble. The membership fee is to cover the expense of issuing the stock. When a member desires to build a home, he takes from the association the amount needed, and assigns shares of the face value of the loan, as collateral security, and agrees to keep up his payments thereon. This is pledging shares. He pays a premium for the loan. The amount of the premium is reached by offering money to the highest bidder, and the pro- posed borrower bids a few cents on each share, payable with the dues, or a lump amount to be deducted, for the right to have the money. Upon securing that right, he designates his security, and a committee appointed by the association, values it, and if it is sufficient security for the proposed loan, the borrower submits his abstract of title to the attorney of the association, who upon pronouncing it perfect, prepares the necessary papers for the loan. The borrower thereafter pays an additional sum into the association by way of premium and interest. The association, through its proper officers, keeps an account of the receipts and disbursements. Members, except those pledging their shares, may withdraw upon certain notice, and receive the withdrawal value of their shares, which is sometimes fixed by statute, and is the lawful interest. The rest of the profits attaching to those shares, goes into the com- mon fund. Each member may borrow if he can give security. The association usually requires a note or bond secured by mort- gage on unincumbered real estate, or a trust deed, or any sum not exceeding the withdrawal value of the shares may be borrowed, and their assignment is taken as a collateral se- curity. A loan secured by pledge of shares, is a stock loan, *The words " members," " share- used synonymously throughout, this holders " and " stockholders " are work. 4 BUILDING ASSOCIATIONS. and when secured by mortgage on real estate, it is a mortgage loan. When the time arrives that the assets are sufficient to mature the stock, a division must be had, after payment of losses and expenses. The controlling rule of this division is that the assets must be divided equally according to the stock holdings. The non-borrowing member receives the value of his stock, and the borrower's debt is satisfied. The stock is thus ma- tured and cancelled. But a borrower is usually given by statute the privilege of repaying his loan at any time, and thereupon withdrawing. So that he is not compelled to stay in to maturity. The revenues of the association usually consist of member- ship fees, dues, premium, interest, fines, and transfer fees. The gross profits consist of membership fees, interest, prem- ium, share of profits left by withdrawing shareholders, fines and transfer fees. Dues are not profits, as they are partial payments on the capital stock. The association will have expenses. They are sometimes provided for by statute; if not, they should be paid out of the general profits from time to time, before any division is made. The directors should only incur such expense as is necessary to the proper conduct of the business. The same care used in private business should be exercised here, for if the directors extravagantly and need- lessly make expenses they grossly violate their trust: This is the general design of a building association, but there are different modifications of this general scheme. This corporation, just as any other, must have officers, who usually consist of directors, president, vice-president, secretary, treasurer, attorney and appraisers. The business of the asso- ciation may call for assisting officers to manage a great volume of business. Compensation of the officers depends, as in any other business, upon their work and the amount of business. The borrowers usually pay the attorney for his services in examination of the title and preparation of papers for loans. The scheme is so simple that it almost carries itself, and attached as it is primarily to land security, which after all is the basis of all security, it does not include so many uncertain DIFFERENT TYPES. problems in its management as does a bank, and unless grossly mismanaged, will show the finest results of financial co-opera- tion. Sec. 4. DiflFerent Tyi^es. In this country we have two distinct and prevailing types; one, serial, and the other per- manent. The general plan of the serial association is to issue a certain portion, say one-tenth of its capital stock in one series, providing that it shall be paid in weekly or monthly dues, and that whenever such payments, with accumulated profits, equal the face value of the shares, each share shall be retired and the holder thereof shall receive the amount thereof in cash; provided that if he is an advanced or borrowing member, i. e., one receiving the face value of his shares before maturity, his debt shall be considered paid and cancelled. When one series is full or the demand is satisfied, then a sec- ond series is issued, and so on until the entire capital stock is exhausted. The plan of issuing in series is only for conven- ience of persons desiring membership, who for any reason do not care to pay dues back to the formation of the association. The profits are the total profits, divided by the number of shares in all series having regard to the age of the shares. The serial association does not credit the profits on the shares to any farther extent than to keep ^the assets in solido for the benefit of all the shares. The value of the shares is ascer- tained from the assets by calculating, though not making, a division. The fundamental principle in ascertaining this value is equalizing all shares. The total net profits, excluding dues, losses and expenses, when there is one series, should be divided by the number of shares. The result is the value of the shares. When there is more than one series, the profits to be appor- tioned to each series must be ascertained, and then the division of the apportioned profits by the number of shares in the series. The calculation simply proceeds upon the theory that a sum representing the net profits of the association is to be divided among certain series of different ages, and the quo- tients again divided by the number of shares in each series or class. All shares in any one series have the same value and mature at the same time. BUILDING ASSOCIATIONS. Very frequently an applicant for membership will enter a series of some months standino^, and pay back to the begin- ning. In such cases, the rules should provide for an additional cost of shares, equal to the present value, as it is readily to be seen his shares would be entitled to profits from the date of the series, whereas the association had not had the benefit of his money. Fines for default in payment of dues, a small expense charge, interest and premium charges and withdrawal privileges are provided for. These associations resemble the English terminating society, differing in that the former makes only a part instead of an entire issue of its stock. In some of these associations, the premium on advancement on stock is deducted at the time the money is loaned; in others, it is charged with the payment of dues. The permanent associa- tion imitates the English permanent society in allowing entrance at any time without back payment of dues. These societies are said by an authority, to be " decidedly the best of all societies, as they contain more of the elements of certainty and equity, if the rules are properly drawn and observed.'" The chief distinction between the two kinds is that a person may enter the permanent association at any time, without the back payments. So far as the names are concerned, one is not more permanent than the other. The " serial " by issuing new series continues, as does the " permanent " by issuing new stock. The permanent association has another irnportant difference from the serial, and that is by the system of crediting dividends on the pass books of members, it actually divides up the profits of the association annually or semi-annually as the case may be. The withdrawing member thus can ascertain the amount he is entitled to; the borrowing member, the amount of his debt, and the investor, the value of his shares. As the permanent system is practiced in England, it is said it holds out the greatest inducements to the borrower, for by enabling him to extend his repayments over any fixed number of years the present cost is not so burdensome, and he has in addition the ' Davis Building Society 69. DIFFERENT TYPES. 7 right of withdrawal of his shares with an ascertained value, and may thus at any time free his pro]>erty of incumbrance.' With us the [)ermanent is not of greater advantage to the borrower than tlie serial, unless it is in the ascertainment of the value of his stock by the crediting of his profits on his pass book. But in one respect it is of decided disadvantage. And that is in the system of permanent societies in crediting dividends at stated periods, with privilege of withdrawing the full amount of payments and dividends. Of all the members the borrower is most likely a contin- uing member. Under the system of dividing up the profits at stated times, any member desiring to withdraw receives not only his payments, but carries away a pro rata part of the profits. This is a decided innovation upon the original scheme which may result in injustice. The association is endeavoring to mature its stock,^ yet it permits withdrawing stockholders to take away a part of its ability to do so. Then the profits might only be apparent. An association running over a series of years may properly expect some vicissitudes. These may eat into the profits, which having been distributed, the burden must fall upon the members who have been the sustaining force of the association. The seeming profits which had been handed out, were then actually losses. In Ohio, this defect is undertaken to be remedied by requiring associations to carry 5 per cent, of the net earnings to a contingent fund to bear these possible losses. This is a step in the right direction, but in our judgment does not go far enough in justice to stay- ing members. The Ohio law provides that after the payment of expenses and setting aside a sum for contingent fund, the the entire remainder of such earnings shall be transferred as a dividend to the credit of all members. Under this statute, the bureau of building associations has decided that after the payment of expenses and the setting aside of the contingent fund, the entire amount left, even to the fraction of a per cent, must be credited on the members' stock. In dividing * Davis 70; compare Davis Si-Td for description of English societies. 8 BUILDING ASSOCIATIONS. the profits, it very often happens that a small sum is left over after fixing the dividend, and as it would only amount to a fraction of a per cent., the work in calculating each mem- ber's share would be very laborious. It is customary, gen- erally, to carry this amount over as undivided profits. But the Ohio bureau holds such action contrary to the statute. It Beems to us that the greater benefits should be given to the continuing member. While the withdrawing member should not be a loser, he should not be a gainer. The association in its relation to him should endeavor to keep him whole as long as it does not infringe the rights of the other members. But if he is unable to comply with his contract and carry out his promises to the end, because a liberal statute has given him the right to terminate it, the equities are pushed too far in his favor, by bestowing upon him, besides his full payments, a pro rata part of the profits. It is foreign to a proper con- ception of the scheme, and while the Ohio statute provides some protection, it does not compensate the continuing mem- ber, and the bureau, it would seem, should have resolved the doubt in favor of the continuing member, rather than against him. This would not only be justice, but save minute divi- sions. The withdrawing member will be justly dealt with by payment to him of the amount of his installments and adding thereto legal interest. The borrower then whose property is charged with the profit bearing mortgage, will have compen- sation and protection for his continuing support of the asso- ciation, as will the staying non-borrowing member, who has shared with him the burdens and responsibilities of the associ- ation's career. The association as any other institution, must conserve its strength and should offer inducements to mem- bers to continue instead of offering compensation for their with- drawal. If the withdrawing member receives legal interest, he is compensated, and if there is a remaining profit, it should go to the staying member. CHAPTER II. PRELIMINARY ORGANIZATION. Section 1. Preliminary Agree- ments. Section 5. Preparation of Cor- porate Articles. Section 3. Agreements Legally Section 6. Conformity with Cre- Considered. ative Law. Sections. Articles of Incorpo- Section?. Procedure After Reg- ration, istration. Section 4. Corporate Name. Section 1. Preliminary Ag^reements. When a number of persons have decided to organize a building asso- ciation, a first step must be taken, and that is a preliminary organization. The promoters of the association should be very careful of the expenses incurred in organizing/ providing for their ' The implied liability of a cor- poration for the services of a pro- moter may be rebutted by proof that they were gratuitously given, and when the services are those of an attorney in organizing a building association, there being no express contract as to services, it is proper to show in rebuttal of the implied contract, that the attorney had ren- dered like services gratuitously in getting up other building associa- tions when the same persons were among the promoters, and the proofs should not be limited to what was said and done at the time of service. Subsequent admissions also may be shown, but it is proper to reject a question as to the understanding of the parties. Third Ward, etc., asso- ciation V. Lotze 11, Bull. 285. (9) 10 BUILDING ASSOCIATIONS. payment, as they are liable individually, for the amount of expenses. To attach liability to each proposed incorporator, they should also carry the preliminary steps to a legal con- tractual obligation between the organizers, for each to bear his part of the expenses incurred in the preliminary organization. There should also be an agreement that the preliminary arrangement will become binding for incorporation. That arrano-ement takes the form of an agreement to subscribe for shares in the association to be incorporated. No particular form is required, unless prescribed by statute, and as it is a matter of simple contract, it rests more upon general principles than statutory requirement. These two simple contracts, for all to bear the expense and to take shares in the new associa- tion, are the only contracts needed until incorporation is ready. If the association is incorporated and does business, all proper expenses may be charged against it. The agreement to bear expenses is intended to have effect when there is a failure tO' incorporate. Sec. 2. Agreements Legally Considered. From a legal standpoint, the agreements may be said to be supported by two considerations; mutual promises and the stronger oner of benefit received by the promissor and detriment to the promisee'. Until a charter is obtained, or incorporation otherwise perfected, an agreement to take shares is a mere offer, revocable or not, as the nature of the agreement may de- termine. When it rests on a valuable consideration, such a& a promise for a promise, then as a rule it becomes an irrevoc- able option, provided, incorporation according to the terms of the offer is perfected within a reasonable time. This would constitute the offerer in substance a stockholder. So if an offer which has no valuable consideration to rest on, be per- mitted to stand until it is accepted by incorporation according to its terras, this it seems would be an irrevocable subscription of stock'. The corporation may enforce the agreement, although it is not a party to it, on the ground that it was made »See Taylor Priv. Corp. sec. 92. Knox v. Childersburg, etc.,Coinpany» «MoraweU P. C. seca. 47, 128; 86 Ala. 180. AGREEMENTS LEGALLY CONSIDERED. 11 for its benefit.' The mere entering into a valid agreement to take shares, does not constitute the persons as partners; there must be some agreement showing an intention to divide and share profits and losses before there is a partnership.' The agreement to take shares should be one to take a certain num- ber of shares of designated face value in the association to be thereafter formed, to be paid for in weekly or monthly install- ments, as the by-laws may provide, with the further provision that if the incorporation never took place, the expenses of the attempt should be equally borne by promoters.' Sec. 3. Articles of Incprporatioii. The promoters of the association having entered into a binding arrangement to take shares in the association, and bear the expense of the organization, the next step is to examine the requirements of the statute on incorporation. A certain number of incor- porators and a certain amount of stock subscribed may be re- quired. The statute should be consulted as to any precedent requirements and if there are any, they must be adhered to. These provisions, if any, being observed, the preparation of the articles of association follows. This should be entrusted to a competent attorney. Sec. 4. Corporate Name. Before the articles are drawn, however, a corporate name must be selected. It is necessary for purposes of identification, at least to the existence of a corporation, and is usually given by the charter, but where not expressly given, may be acquired by implication and use.* The misnomer of a corporation in contracts or pleadings has an effect similar to the misnomer of an individual. If from the body of a written contract, in which a corporation is mis- named the corporation intended can be ascertained, the mis- nomer is immaterial.* ''Haskett v. Flint, 5 Blkf . 69 ; Far- *No notice is necessary in refer- low v Kemp, 7 Blkf. 544; Eastern, ence to calls on subscriptions: Mor* etc., Company v. Vaughan, 14 N.Y. rison v. Dorsey, 48 Md. 461. 546; Athol, etc. Company v, Carey, *Smith v. Plank Road Company, 116 Mass. 471; Buffalo, etc., Com- 30 Ala. 650; Minot v. Curtis, 7 pany v. Gifford, 87 N. Y. 294. Mass. 441. 'Shibley v. Angle, 37 N. Y. 636. 'Hoboken etc. Association v. Mar- tin, 13 N. J. Eq. 427. 12 BUILDING ASSOCIATIONS. A building association cannot by user, acquire an exclusive right to use in its title of incorporation, a general term, descriptive merely of the locality with which its business is connected.* The name should have some significance as a matter of policy and should not resemble existing corpor- ate names to prevent confusion. Sec. 5. Preparation of Corporate Articles. The name having been selected, the attorney prepares the arti- cles of association. The incorporating statute usually defines what the articles shall state, so it is a matter of sticking closely to the statute. Wherever the statute is general in its definitions as that " the articles shall state the objects of such association," it becomes a matter of care to define the objects broad enough to meet the requirements of the association, and yet limited enough to be clearly within the spirit of the statute. When the articles are drawn the organizers sign in manner prescribed by statute before some oificer capable of taking acknowl- edgments. The latter is for the purpose of procuring their registration. The beginning of the corporate existence is signing, acknowledging and filing in the places prescribed by law, the articles of association.* The injunction should be strong, that the articles be prepared with great care by an experienced draughtsman. Unskilled work here, will bring on endless trouble and embarassment. The English courts, in several cases, have observed that the articles were so drawn as to perplex the understandings of the ablest men.3 American courts have patiently endeavored to untano-le some serious complications rooted in unintelligible charters. Sec. 6. Conformity with Creative Laws. If the incorporation is by letters patent from the Chief Executive, the articles must conform to the statute vesting the authority in the executive to issue letters ; in the case of special legis- 'Coloaial, etc., Company v. Home, 'Carmody v. Powers, 60 Mich. 26t etc., Company, Lim., 33 L.J. Ch. 741. 'Davis Building Society 17. PROCEDURE AFTER REGISTRATION. 13 lative act,» the charter is the constitution and the by-laws must not subvert the intention of the legislature. If the in- corporation is by general statute, the provisions therein must be given substantial adherence. Too often does the charter invade the province of the by-laws, and prescribe rules belong- ing legitimately to the by-laws. If they prove unwise, amend- ment or repeal is difficult. The charter should be general in its character, adhering to the letter and spirit of the creative law, and leave to the by- laws the proper limitations as they may be needed. Sec. 7. Procedure After Registration. Wlien the charter is signed, as required by statute, and the signers duly acknowledge the execution of the instrument, it is then to be filed in the places provided by law for registration. Thereupon the association becomes a body corporate with all the duties and liabilities of a corporation. The individuals who were active in its promotion have changed character, and are now stockholders. They become so by operation of law, and are not entitled to any notice by the association that they are stockholders, subject to its rules and to the payment of dues. The first act of the new corporation after the adoption of by- laws and the election of oflicers, is to issue certificates of stock to the members. They are shareholders from the date of in- corporation, and they should adopt by-laws and elect officers.* The certificates are not issued until after the officers are chosen. Their issue does not change their legal status, as the certificate only evidences the holder's interest, as a promissory note is not the debt itself, but evidence of it. Before discussing the member as he is thus created, the im- portance of understanding the charter and its legal signifi- cance should not be overlooked. ' An act of the legislature incor- petition failing to specify the ob- porating an association by its con- jocts, it was competent for the court stitution and bylaws, without em- to do so: Red wine v. Gate City, bodying the same in the act, ia etc., Association, 54 Ga. 474. valid and constitutional: Bibb * The adoption of by-laws and Co., etc.. Association v. Richards, election of officers are discussed at 21 Ga. 592. ; and where incorpor- chapters V. and VL ation was by decree of court, the CHAPTER III, CHARTER. Sectiow 1. Importance of char- Section 4. EfEect of failure to ter. observe statute. Section 2. Must generally ad- Section 5. Construction, here to statute. Section 6. Amendment. Section 3. What constitutes char- ter and its legal effect. Section 7. Corporate seal. Section. 1. Importance of Charter. After the preli- minarj organization, a charter is necessary, and as was stated in the preceding chapter, it should be drafted carefully and by an experienced person. Its preparation should be referred to the attorney of the association. This fundamental instrument largely gives and measures the powers of the association. The promoti ng persons by its execu- tion, have changed character and have been merged into the body corporate. As individuals their identity is gone, but as parts of the corporation, it is preserved, so far as rights and liabili- ties are concerned. The law has invested them with new duties and new rights, and ignorance of them will not serve as an excuse to stay the consequences of ignoring them. It is important to know something of the charter and the legal «tatus of the association and the member, when a charter is issued and the corporation first has a legal existence. (14) WHAT CONSTITUTES CHARTER. 15 Sec. 2. Must Generally Adhere to Statute. The state statutes generally deiiue the provisions of the charter. In drawing it, substantial adherence to the statute must be observed. As has been previously stated, it is unwise to say too much in the articles of association. They should not par- ticularize too much, for subsequently it may be found neces- sary to change some material provisions, and serious difficulty is then encountered. As a suggestion, the provisions of the statute should be given a general observance, and while adher- ino- to the letter of the statute, it should be construed by its patent intent. The articles must keep within the scope of the statute, but where it makes no specification, for instance as to the face value of the shares, it is best to leave that to the by- laws as they may be adopted by the stockholders. Experience may show the ailvisability of changing the denomination of shares after incorporation, which may be readily done under such a charter. Other matters, such as the internal govern- ment of the association, for instance, as to the number of directors, may be treated in the same way ; but the corporate objects should be clearly and amply specitied so that the asso- ciation may be able to perform its natural functions without question. Sec. 3. What Constitutes Charter and its Legral Etfect. The articles of incorporation of an association formed under the general laws of the state, are its charter and subject to the constitution and general laws of the state, its funda- mental and organic law.' They fix the rights of the stock- holders, and are in the nature of a fundamental contract in form between the corporators, and in practical effect between the association and its stockholders, which neither party is at liberty to violate.' By the filing of the articles of association and the passing to the incorporators of a legislative grant of incorporation, there arise contractual relations which are said • The constitution of the state is association with righta conflicting the higher law of course than the with the constitution: State v. legislative enactments, so that a McGrath, 95 Mo. 193. charter is amenable first to that law. * Bergman v. St. Paul, etc., Asso- The legislature can not invest an elation, 29 Minn. 275. 16 BUILDING ASSOCIATIONS. to have a triple character, being one between the state and the corporation, between the corporation and the Btockholders, and between the stockholders and the state.* In determining the rights of these contracting parties, reference must be had to the creative law.* It is the primary source of these con- tractual rights, but the articles of incorporation and constitu- tion and by-laws may be examined for the purpose of deter- mining some of these rights.' Sec. 4. Effect of Failure to Observe Statute. The charter should conform to the statute; as to powers, it must conform, for if it wantonly exceeds the legislative authority, the state may exercise its inherent right to with- draw the charter and from that source lies danger. The safe course is to follow the statute, but failure in strict compliance will not always defeat incorporation,* as where the certificate of incorporation was acknowledged before a wrong ofiicer, it was held that upon correction, the corporation was de jure from the date of its organization, not only as against persons dealino- directly with the association, but as against all others.* And the defects in organization can not be attacked in a col- lateral suit.' The courts generally declare that if there has been a bona fide attempt to organize a corporation, persons as members and borrowers will not be allowed to say the asso- ciation can not enforce its contracts, because it is defectively organized.' The refusal of the courts to assist persons in defeating their agreements with associations, extends only to imperfections in organization. If the association is so defec- tively organized that it can not legally carry on its corporation » Cook Stock, etc., sec. 492 ; it has * Lord v. Essex Building Associa long been settled that as between tion, 87 Md. 320. the state and the corporation the ' Spinning v. Home, etc., Associa- charter is a contract: Dartmouth tion, 26 Ohio St. 483. College Case, 4 Wheat. 518. 'Williamson v. Kokomo, etc., * McCahan v. Columbian etc.. Association, 89 Ind. 389. Association, 40 Md. 226; Michigan, ' Hagerman v. Ohio, etc., Asso etc., Association v. McDevitt, 77 elation, 25 Ohio St., 186 ; Payette v jlich. 1. Free Home, etc., Association, 27 111 * McCahan v. Columbian etc., As- App. 307. Bociation, 40 Md. 226. EFFECT OF FAILURE TO OBSERVE STATUTE. 17 business, it should re- incorporate and transfer the property to the new corporation or wind up its atfairs and paj its debts and distribute its assets. The corporation may be so defective as to render the fran- chise whollj invalid in a proceeding against it by the state, still its corporate existence when acting under color of a franchise, cannot be questioned in a suit where it would arise collaterally.' But if the association steps beyond its corporate authority and clearly violates its charter, the remedy may not be alone with the state. The court fully cognizant of its ex- ceeded authority, and having no equities of third persons to preserve, will pronounce its contracts void and leave the asso- ciation stripped of all rights assumed by the transaction.* And the association cannot enlarge its functions by incorpo- rating powers in its charter that are not authorized or con- templated by statute.' Sec. 5. Construction. Care should be taken that in framing the charter, the domain of the by-laws is not invaded. The by-laws yield readily to amendment, while the charter is an inflexible compact, changeable only by the power granting it. The inflexible character of the charter and its importance as the instrument of corporate existance, are too often over- looked. It is frequently framed without care, regardless of the duties and rights that spring from it. Considered as a contract, its construction is one of intent of the parties, the state and the incorporators. This intent is discoverable by the legislative utterance on the part of the state and from the instrument itself on the part of the incorporators. So lono- as the instrument is the subject of construction, the work is a possible one. but when its amendment is considered, the rio-hts of both contracting parties intervene and must be carefully adjusted without legal injury. 'Lincoln, etc., Association v. etc., Association, 27 111. App. 807. Graham, 7 Neb. 173; Williamson 'Anderson v, Cleburne, etc., As- V Kokomo, etc.. Association, 89 sociation, 16 S. W. Rep 298; Simp- Ind. 389; Building Association v. son v. Building Association, 88 Moreanthal, 2 Pears. 343; Winget Ohio St. 349. V. Quincy, etc.. Association, 128 111. 'Albright v. Building Associ- <{7; Tayette, etc., v Free Home, ation, 102 Pa. St. 411. 2 ,18 BUILDING ASSOCIATIONS. Sec. 6. Anieiiclmeiit. The power to amend, pre-sup- poses legislative authority. All powers rightfully exercised by corporate bodies, being conferred by the government, either in express terms or by clear implication, authority for every corporate act must be found in the grant or requirement of some legislative act.* In determining whether or not the charter, the creative instrument, may be amended, it is neces- sary to examine the legislative act under which it is given. Ko vote or act of a corporation can enlarge its chartered authority, either as to subjects on which it is intended to operate, or the persons or property of the corporators. If created with a fund limited by the act, it cannot enlarge or diminish the fund, and if the capital stock is divided into a fixed number of shares, this number cannot be changed with- out authority from the legislature.' The legislature has the inherent right to amend where no vested rights are impaired, with the consent of the majority of the stockholders', but no material amendment can be made, except by unanimous consent of the stockholders.* The legislature may reserve power tO' amend. When the legislature reserves power to amend, it may do so in a way reasonable and consistent with the scope and object of incorporation.* Of every corporation formed under the general law, the law itself becomes the charter, defines and enumerates the pow- ers which are to be exercised, the nature and extent of cor- porate franchises and privileges. The declaration of incor- poration, the constitution and by-laws adopted for corporate government, do not form the charter or define or enum- erate the corporate powers. These are the acts of the incor- porators. The charter is the grant from the sovereign power of the state; and by that source only can be amended or enlarged.* > State V. Washington, etc., Com- Tharp, 1 Houst. Del., 149. ipany, 11 Ohio, 96; but see Wange- *Cook Stock, sec. 495. irien V. Aspell, 47 Ohio St. 250. » Shields v. Ohio, 95 U. S. 319. ' Salem Mill-Dam Corp. v. Ropes 'Grangers, etc.. Company v. Kam- 6 Pick. 23. per, 73 Ala. 325. 'Delaware R. B. Company v. AMENDMENT. 19 "The power to alter and modify does not give power to make any substantial addition to the work."' Within these limits the len^islature may exercise reserved power without the consent of the corporation." If the amendments exceed these and alter contract relations, the consent of the stockholders must be had.' If the amendment be merely auxiliary, that is merely an assistance to carry out the original plan, the consent of the majority of the stockholders is sufficient.* But if the amendment is fundamental, materially changing the original plans unanimous consent is necessary.* If the incorporation is under a general statute, the legisla- tive amendment may be by a general enactment, and if the in- corporation is by special enactment the amendment of the charter would be by special statute. When it is proposed to amend the charter, legislative author- ity is prerequisite. The legislature can amend with consent of stockholders; if the amendments are material, unanimous con- sent is necessary; if incidental, a majority consent is sufficient. If the statute authorize amendments they may be made, 'Zabriskie v. Hackensack etc. leges, which do not change essen- Company, 18 N. J. Eq. 178. tially the nature and character of *Cross V. Peach Bottom, etc., Com- the corporation, or the purpose for pany, 90 Pa. St. 392. which it was created, and have for 'Illinois, etc.. Company v.Zimmer, their object the promotion of the 20 111. 654. enterprise originally contemplated, ^Illinois, etc.. Company v.Zimmer, fall within the second class. All fiupra. amendments which work a radical' *Mill8 V. Central, etc.. Company, change in the nature and character 81 N. J. Eq. 1 ; Cook Stock, sec. 500. of a corporation, or the purpose for In a Connecticut case, the court said : which it was created, are within the "Some amendments or laws affect- third class." New Haven, etc.. Com- ing corporations are binding with or pany V. Chapman, 38 Conn. 56. It without their assent. Others bind should be observed that there is a the corporation and every member distinction between the obligation thereof, if assented to by a majority of a contract and the remedy given of the stockholders. And others are by the legislature to enforce that not binding upon non-consenting obligation. Without impairing the members, although assented to by obligation of the contract, the rem- the majority. All general laws, and edy may be modified or changed as mere matters of police regulation, the legislature may direct; Sturges are embraced in the first class. Ad- v. Crowninshield, 4 Wheat 122. ditional powers, duties and privi- 20 BUILDING ASSOCIATIONS. although the charter is silent on the subject,' but under such power, a majority of stockholders cannot make a fundamental chancre and bind a non-consentins: stockholder. Where the amendments are merely auxiliary, a majority may consent and make them binding. The application of the law to the facts of each particular case, renders the subject full of difficulties, and the right to amend the charter should be carefully inves- tigated before any attempt is made, or the whole corporate existence may be involved in confusion. Sec. 7. Corporate Seal. Building Associations can better carry on their business with a regular corporate seal. The ancient rule applied to corporations existing by the com- mon law was that they could only act by their common seal; the rule has no application to corporations created by statute.* The rule is however, that the corporate seal need not be at- tached to a corporate contract, unless a similar contract, when made by an individual, would require a seal.' Thus, a build- ing association in a deed, would need to use a seal as required of an individual; however, any device or form will operate as a seal if there was an intent to bind the association and a seal of some kind was used.* This rule would not apply in states where the statutes require a corporate seal to be used. 'Wangerien v. Aspell, 47 Ohio St. 250. If the charter itself provides a mode of amendment, it must be adhered to: McKeown v. Building Association, 5 Bull. 62. 'Curry v. Bank, 8 Port Aia. 861. *Cook Stock, etc., sec. 721. *Cook Stock, etc, sec 723 and cases cited. CHAPTER IV. MEMBERS. Section 1. tiOD. Section 2. fications. Section 3. bership. Section 4. rial. Section 5. Effect of incorpora- Membership Quali- Purposes of Mem- Purpose not mate- Right to borrow. Section 0. Right to withdraw. Section 7. Certificate of stock and pass-books. Section 8. Members estopped to deny incorporation. Section 9. Illegal to Invest funds in other corporations. Section 10. Death of Stock- holder. Section 1. Effect of Incorporation. By the issuing of the charter, the association is erected as a corporation. Con- sidered either as an artificial person or as a body of stock- holders, in law it is a legal entity in that it remains a whole, although its component parts may change. The stockholders, as the persons to whom the corporation belongs, have, by be- coming stockholders, assumed contractual relations with each other, with the corporation and with the state. The building association, being a modified type of private corporations, to perform its peculiar functions embraces a variety of unusual rights and liabilities for the stockholder. Upon his subscription for stock he pays an entrance fee. There are no other pre- requisities of membership unless they are the legal disabilities of infancy and coverture, which are Bometimes removed by (21) 22 BUILDING ASSOCIATIONS. statute. Of course, a non-compos could not be a member. The law does not recognize him except by its guardianship. Sec. 2. Membership Qualifications. A person be- comes a member of a building association by subscribing for and holding stock/ He acquires status as a stockholder in this way. The incorporating statute usually provides for the manner of the holding, and the by-laws, in accordance there- with, give the rules governing his membership ; but he is not compelled to accept any conditions of membership imposed by the by-laws, and not authorized by statute.' Any person, ca- pable of entering into a binding contract, may become a member of a building association; although, in some states, this ability is extended by statute to married wumen and in- fants, who, at common law, are unable to enter into contracts, they are not thereby given the power to bor- row money and execute a valid mortgage therefor, unless the statute expressly enables them to do so. The association^ when authorized by statute, may receive them into member- ship; but further contracts, entered into without express legis- lative authority, will be taken at its peril. In some states, general married women enabling acts have been passed, where- by they may contract for certain purposes; under these stat- utes, the association may safely enter into contracts beyond the membersliip agreements, but, as the statute is in deroga- tion of the common law, it must be strictly construed.^ Any contract thus made must strictly adhere to the statutory im- provements. In making contracts with married women, as in loaning money to theiu, it should be carefnlly understood in writing that the money is going for the purposes for which they are enabled to contract. Sec. 3. Purposes of Membership. A person enters a building association for one of two purposes; to deposit his ' Robertson v. Homestead Asso- ling act, but continued payinj^ ciation, 69 Am. Dec. 151, note. monthly installments after its pas- * Building Association v. Robin- sage, she cannot set up her disa- 6on, 46 L. I. Pa. 5. bility at the time she entered into * But where a married woman the contract; Dilzer v. Building purchased stock prior to an enab- Association, 103 Pa. St. 86. RIGHT TO BORROW. 23 money or to borrow. His deposits, generally of required periodical svinounts, are applied by the association as payments on his stock. The dues are nothing but partial payments on stock. Thus the depositing member by his small payments is enabled to accumulate and put his accumulations at work. The association adds those accumulations to his stock pay- ments — dues — and when the aggregate is equal to the face of the stock it is retired, the membership ceases. In thus re- receiving stock subscriptions and distributing the earnings thereof in part payment of the subscription debt, to itself, the association occupies a position between a private corporation and a partnership. The statute thus conceives it and for con- venience has endowed it with a corporate character. Out of this process correlative rights grow. The association is entitled to require the payment of dues as agreed by the member, and if they are not paid, to enforce a penalty.* The member, on the other hand, is entitled to have the net profits pro-rated and so credited on his stock.' No other corporation is given suchl powers and no other stockholder has such rights. In ordinary corporations, the stock subscriptions are presently due, and the profits are declared as dividends, and are withdrawable interest on the investment. Sec. 4. Purpose not Material. The purpose of the member's stockholding is not material to the association. He may invest for profit or to meet debts or to acquire a fund for business or to get a loan.^ His status us a stockholder is not affected by his purpose of entering. For him it i^ merely a savings institution in which he places his money and holds stock. Sec. 6. Rig-ht to Borrow. One of his important rights is to borrow money from the association. Whenever the dues and other revenues create a surplus in the treasury, he has the ' From the moment a member * People v. Lowe, 117 N. Y. 175. joins, until he withdraws or his stock 'Mutual Savings etc. ABSociation matures, he is a debtor to the asso- v. Wilcox, 24 Ck>nn. 147. elation for the unpaid balance of his stock; Michigan, etc., Association V. McDevitt, 77 Mich. L 24 BUII.DING ASSOCIATIONS. right to take it npon such reasonable terms as the association may fix. The legislature invests the association with the power to loan money, in fact it imposes upon it the duty of lending it to the members who have a right to compel its loaning. He takes on additional rights and burdens by bor- rowing money, but he has the right to borrow as he has also the liability of the debt. and its cost in the shape of prem- ium and interest. Sec. 6. Right to Withdraw. The member may ter- minate his membership, stop future payments and liabilities upon notice to the association. He is invested with the right to surrender his stock upon equitable terms with or without the consent of the association. In this he differs from an ordinary stockholder, and is somewhat like a partner, who by retiring, dissolves the partnership. The withdrawing member does not affect the corporation or the other stockholders, but 'be effectually terminates his membership, as does the retiring partner his partnership. The member has the legal attributes of both partner and shareholder so adapted as the purposes of his existence require, yet he holds legal status as a stockholder and must be so considered. Sec. 7. Certificates of Stock and Pass-Books. When a person has entered an association, a pass book is issued to him upon which his periodical payments are to be credited. The pass book is accompanied by a certificate of stock. The pass books are prima facie evidence of membership.* But the holding of a pass book and certificate of stock is not necessary to constitute membership.* If lost, the association may replace it upon proper indemnity that it will suffer no loss thereby.' Keasonable rules concerning the issuing of certifi- cates will be upheld, so where the by-laws provide that a defaulting member might take a new certificate for a less number of shares, and the payments on the old were to be applied on the new, the court held that all arrears on •Qermantown, etc., Association, v. 'Chester, etc., Co. v. Dewey, 16 Sendmeyer, 50 Pa. St. 67 ; Dobin- Mass. 94. son V. Ha-wks, 12 Jur. 1037. «0ook Stock, etc., sec. 870. MEMBERS ESTOPPED TO DENY INCORPORATION. 25 the old must be paid before the member was entitled to the privilege.' Seo. 8. Members Estopped to Deny Incorpora- tion. It is the rule well established, that a party dealing with the association and receiving the benefits of a contract, cannot claim that the association is defectively organized or that the creative law is unconstitutional. This right is in the state; and a person receiving membership benefits from the associa- tion may become estopped to deny his membership.^ The result of this rule is that contracts of the association beyond its power may be sustained as against a benefitted party or a stockholder, yet the directors should not knowingly venture beyond the corporate scope,* as their acts might invoke remedies with a different result.* The association by receiving dues is likewise estopped to deny the existence of stock.* 'Fulton V. American, etc, Associa- tion, 48 N. W. R.781 ; Eaton v. Am- erican, etc.. Association, 49 N. W. R. 865. 'Winget V. Quincy, etc., Associa- tion, 128 111. 67. *Bate3 V. People's, etc., Associa- tion, 42 Ohio St. 655. So one whose mortgage recites that he is a mem- ber, cannot deny membership in an action for foreclosure. Howard, etc., Association v. Mclntyre, 3 Allen 571 ; a borrower can- cannot deny the right of the asso- ciation to loan on more than the number of shares limited by law, and his creditors are likewise es- topped: Building Association v. Ar- beitur Bund, 6 Bull. 823. And where it is required tliat the whole capital stock be taken in an association where the amount of capital stock is fixed and the number of shares ascertained, yet if a shareholder knowing the full stock has not been taken, attends meetings, votes for the expenditure of money, and the purchase of property, or does other acts from which it may fairly be inferred that he intends to waive such right, he will be estopped to set it up as a defense upon his stock subscription: Morrison t. Dorsey, 48 Md. 461. *The "corporate scope" is the purpose of the association as ascer- tainable from the articles of asso- ciation, together with such purposes as are necessarily implied in pro- perly conducting the business. 'A minority of the stockholders may maintain a bill in equity to prevent illegal action on the part of the majority after request to the proper ollicers to interfere, and their failure or refusal so to do. Memphis, etc., Co. v. Woods, 88 Ala 630. *North America, etc.. Association V. Button, 35 Pa. St. 468. 26 BUILDING ASSOCIATIONS. Section 9. Illegal to Invest Funds in Other Cor* porations. It may be taken as a general proposition that ai building association has no power unless authorized by statute to hold stock in another association or corporation.* The reason of this is patent, as it was intended by the legislature that the corporate resources should be entirely applied to furthering the objects of the corporation. Section 10. Death of Stockholder, In case of death of the stockholder, the by-laws should make some provision for the retirement of the stock or the manner by which it may be carried on. When it is provided that in the event of the death of a stockholder, his heirs or legal representatives were entitled to continue the relation of stockholder, the death of the member operates a dissolution of his membership, terminating his con- nection with the association; and upon his heirs or devisees and not upon his personal representatives is conferred the privilege of succeeding to or continuing the membership; and if such privilege is exercised by the heirs or devisees, they become members not in a representative capacity, but in their own right, and they are subject individually to the duties and liabilities of membership.' 'Mutual, etc., Association v. ' Montgomeiy, etc., Association Meriden, etc., Co., 24 Conn. 169. T. Bobinson, 69 Ala. 418. CHAPTER V. BY-LAWS. SROTioir 1. Framing and adop- tion. Power Notice of amend- Sbction 2. Definition to enact and amend. Section 3. ment Section 4. Character of by-laws. Section 5. Construction of by- laws- Sectioit 6. Amendment of liy- laws. Resolutions and Mode of amend- Section 7. amendment. Section 8- ments. Section 9. Provisions of by- laws. Section 1. Framing- and Adoption. The iiicorporator& should select a committee to frame the by-laws and fix a time wheu its report is to be heard. Notice should be given of the time and place of the meeting. The discussion of the by-laws should be full, and their character well understood, as the by- laws being the law arranged for the internal government of the association, and affecting the stockholder's rights throughout he should know what they mean. The suggestion applies with equal force to the association, as in the case of litigation, the result is most often dependent upon the construction of the by- laws. The by-laws, upon their adoption by the incorporators, should be printed and circulated among the stockholders. Each stockholder should have actual notice of their contents. It may be said as much particularity should be exercised in framing by-laws as the charter, (87) 28 BUILDING ASSOCIATIONS. Sbo. 2. Definition — Power to Enact and Amend. A bj-law is a rule by which the affairs of the association are fto be conducted. The power of corporations to enact by-laws, exists independent of statute, but the incorporating statute usually gives the power. The power to make by-laws resides in the stockholders; the directors have no inherent right to make them.' Usually, in the promotion and incorporation of an association, part of the promoters and incorporators act as the first board of directors. The by-laws should not be adopted by them as directors, but as stockholders, unless the charter expressly confers on the directors such power. Yery often it is inconvenient for the stockholders to be called together to amend the by-laws, and when it is done, it is gen- erally a perfunctory matter, so it is convenient to have the power of enacting and amending by-laws delegated to the directors by the stockholders. This may be done in the by- laws.' But the exercise of this right by the directors does not dispense with the necessity of giving full notice of the amend- ments to each stockholder. Sec. 3. Notice of Amendment. Notice should be given, as provided in the by-laws, or, in the absence of any provision it may be given by mail, or by posting up the amended by-law in the ofBce of the association, and calling €ach niember's attention to it. The safest course is by mail, as the member may not be in the office. A person has the right to treat the by-laws, given him on his becoming a member, as all the by-laws of the association, and he is not bound to take notice of modifications of such by-laws on the record of the company simply, without further notice to him.^ And the burden of showing that notice was given is upon the asso- ciation, so it should adopt the method that_is a sure convey- ance of notice to each stockholder. But a member cannot resist payment of stated dues, fines, etc., on the ground that by-laws of the association have not been adopted by a vote of ' Morton, etc. Co. v. Wysong, 51. • McKenney v. Diamond State, Ind. 4. etc., Association, 18 All. Rep. 905. ' Heintzelman v. Druids', etc., As- sociation, 36 N. W. Rep. 100. CHARACTER OF BY-LAWS. 2^ the members or directors, where it appears that they have been recorded, acted upon and enforced as the by-laws of the association.' Sec. 4. Character of By-Laws. Too much care can- not be exercised in their construction, for the association, as well as the member, is bound. In framing by-laws, assistance "will be had in consulting the by-laws of other associations, adopting a clear, concise and explicit expression. Nothing should be left in doubt as to meaning. As a general rule for guidance, the by-laws must be reasonable, equitable, and con- sistent with the purposes of the association. They must not be contrary to public policy or the established law of the land. Neither must they attempt to oust the jurisdiction of the courts by prohibiting an aggrieved party from seeking legal remedies beyond the jurisdiction of the corporation.' There is no objection to the rules providing for settlement of disputes between the association and its members by arbitration, a prac- tice common to English societies, but, if adopted, it should be considered only a means of ascertainment, and not the final determination of the dispute. The authority to pass by-laws is an authority to pass such only as are consistent with the articles of incorporation and the statute.' There are limits beyond which the corporation, by its by-laws, cannot go. For instance, the amount of fines must be reasonable. The delin- quent cannot be fined twice for the same offense.* A building association cannot, by a by-law, compel its stockholders to offer a premium for priority of payment after its shares have become worth par.' A by-law providing that each member shall sign ' Hagerman v. Ohio, etc., Associ- * Hagermaa v. Ohio, etc., Asso- ation, 25 Ohio St. 1S6 ; Morrison v. ciatioti, 25 Ohio St. 186 ; Forest City, Dorsey, 48 Md., 461. After enjoy- etc.. Association v. Gallagher, 25 ing benefits for years, member can- Ohio St., 208. not Bay he did not sign bylaws: * Rodgers v. Building Association, Parker v. United States, etc., Asso- 7 W. N. C, (Pa) 95; see Building ciation, 19 W. Va., 744. Association v. Jones, 2 L. T. N. S., « Bauer v. Samson Lodge, 102 (Pa.) 17. Ind., 262. » Bergman v. St. Paul, etc., Asso- ciation, 29 Minn., 275. 30 BUILDING ASSOCIATIONS. a certaiQ instrument containing an obligation to obey the charter and laws, is only directory. If a person becomes the owner of stock, he acquires membership without signing any agreement whatever.' These are examples showing a violation of the general principles cited as those guiding framers of by- laws. The by-laws, by operation of law, become a part of the contract between the association and the members. They may be examined, for instance, for the purpose of determining when the mortgage contract terminated.' So by-laws defining the duties of a secretary become a part of the contract of the sure- ties on his bond.' This fact exerts an important influence upon the right to amend as a vested right cannot be impaired. Sec. 5. Construction of By-laws. The construction of by-laws must be a fair one, and a construction which would operate with harshness and oppression upon the party in default, will not be indulged by the Courts.* If a by-law consists of several distinct and independent parts, although one or more of them may be void, the rest are equally valid, as though the void clause had been omitted.* If the association waive the rule of its by-laws, the member violating it has no right to complain, nor has any other person standing in the relation of surety for him, any cause of com- plaint. So a member holding a greater number of shares than is allowed by its by-laws, but not in excess of the numbw limited by statute, cannot defend against a claim the associa- tion has on account of such shares.' And if the association, having an express power to loan money upon real estate, upon terms prescribed in the by-laws, a loan not in conformity with and in contravention of the by-laws is not void as ultra vvr6%? Sec. 6. Amendment of By-IjaTVS. The amendment of by-laws is an important matter, and should be carefully * Building Association v. Robin- ^Monumental, etc., Society v. Bon, 46 L. I.. (Pa.) 5. Lewis, 38 Md. 445. 'McCahan v. Columbian, etc., Aa- *Shelton v. Mayor etc., 30 Ala. 540. Bociatlon, 40 Md. '';26. *Hagerman v. Ohio, etc., Associa- *Humboldt, etc.. Society v. Won- tion, 25 Ohio St. 186. nerhold, 81 Cal. 528. ^Kelly v. Mobile, etc, Aesociatlan, 64 Ala. 601. AMENDMENT OF BY-LAWS. 31 done. Power to make by-laws implies power to repeal them.' By-laws may be amended so as to effect future benefits but not vested claims.' Plaintiff in a case became a member of de- fendant building association at a time when a by-law thereof provided that all non-borrowing stockholders wishing to with- draw, shall be privileged so to do, upon giving notice to the directors of his or her intention, and shall be entitled to re- ceive the amount of installments actually paid in without in- terest. Held that plaintiff's right of withdrawal was a vested right, of which defendant could not deprive him without his consent by a subsequent repeal of the by-laws.* When a member has contracted upon the faith of a by-law, and has acquired rights under it, the association has no power to change the by-law so as to affect him. The by-law became a part of his contract, and the association can no more rescind that part of his contract without his consent, than it can any other part; and amendments or rules made after the contract, cannot by any construction have an ex post facto effect, when his rights would be thereby impaired.* Suppose the by-laws provided that upon the payment of a certain amount, the mortgagor should be entitled to a reduction of his mortgage interest and premium. The association has no legal right to subsequently repeal or amend that by-law, so as to deprive the mortgagor of his beneht thereunder. He had executed his mortgage with that right in contemplation; it had become vested in him, and the association cannot, without his consent, wrest it from him. This is a fair illustration of the rule.s 'King V. Ashwell, 12 East, 23. credit. Auld v. Glasgow etc. So- *Stohr V. San Francisco, etc., 8o- ciety, 12 App. Cas. 197. So where ciety, 82 Cal. 557 ; Weise v San a by-law provided that "all non-bor- Francisco, etc.. Society, lb. 646. rowing members wishing to with- "Holyoke etc. Association v. Lew- draw shall be privileged so to do in, 27 Pac. R. 873. upon giving notice to the directors ^Christie v. Northern Counties, of his or her intention, and shall be etc.. Society, L. R , 43 Ch. Div. 62. entitled to receive the amount of in- *Other illustrations: Where ma- stallments actually paid in without jority of members in a depreciated interest. Held, that the member's association passed a rule that a cer- right of withdrawal was a vested tain amount should be deducted, it right of which defendant could not has held ultra vires, and members deprive him without his consent by who had given notice of withdrawal a subsequent repeal of the by-law: after the resolution, were entitled to Holyoke, etc., Association v. Lewis, be paid the whole amount at their 27 Pac. R. 872. 32 BUILDING ASSOCIATIONS. But amendments having a retroactive effect, apply fully, unless a right vested under prior laws is impaired. A constitution originally provided that a member whose shares were unpledged for loans, might give notice of withdrawal, at any time, and that from and after such notice, all dues on such' shares should cease. In June, 1876, all holders of unpledged shares gave notice of withdrawal, and thereupon the section of the constitution requiring the payment of dues on shares, was amended so as to provide that no dues be thereafter required from the unpledged shares. Another amendment was also then adopted, changing the manner in which withdrawal shares were to be paid off, instructing the directors to close the business of the association. Held, by the court, that these amendments in no manner changed the contracts evidenced' by the note and mortgage or released either party from any obligation thereon.' While amendments not impairing vested rights may be made to have a retroactive effect, yet they must be brought to the knowledge of each member to bind him. Sec. 7. Resolutions and Amendments. The rule that a by-law cannot be passed so as to impair a vested right, applies to resolutions of a board of directors.* A resolution of a building association providing that the value of all stock borrowed on to a certain amount, should be allowed to such holders as wished to redeem, can not be rescinded to the pre- judice of a member who has made application to withdraw and had refrained from paying his monthly dues in the belief that his application had been accepted.' A resolution permit- tin o- borrowers to withdraw on certain terms, the stock to be cancelled, when acted on by a member, is conclusive on the • Hekelnkaemper v. German, etc., Northern Counties, etc., Society, L. Association, 22 Kan. 549. R 43 Ch. D. 62. « Neitiier rules nor resolutions can « Eyre v. Building Association, IT have an ex post facto effect, when l. I. (Pa.) 148. rights are impaired: Christie v. PROVISIONS OF BY-LAWS. 33 association; it amounts to an accord and satisfaction.' The rules must be in conformity with the by-laws and charter. In the management of the association, unwritten regulations sometimes govern, simply because they are reasonable and have been acted on by the members, but, if they are inequit- able, the courts will not enforce them.' Sec. 8. Mode of Amendments. The mode of amendment prescribed in the statute, charter, or by-laws, themselves, must be strictly followed, or the amendment is nugatory.* The by-laws usually provide how and when thej may be amended; in such case, the procedure, as defined, must be followed. The by-laws should not be incorporated in any part of the charter, and the rules of the association should be kept dis- tinct from the by-laws. This is especially necessary, as amendment of the by-laws may be attended with delay. The association needs a simple code of rules, governing the man- ner of making loans, and their payment, and such other mat- ters as relate to its routine business. The directors may amend these rules upon the principles that by-laws are amended. Sec. 9. Provisions of By-Laws. In its by-laws, the association should specify the character of its shares and the manner of their issue; its officers, the mode of election, term of office, and the manner of tilling' vacan- cies; the duties of the officers; the place and time of annual meetings of shareholders, and regular meetings of stockholders; the manner of calling special meetings of stockholders and directors; the number necessary to con- stitute a quorum; the appointment of an auditing com- mittee, and such other committees as may be nec- essary; the seal to be used by the association; the fine •Miller V. Second Jefferson, etc., interest on money bid, when th-ht to sell the notes to change its investment. The power to buy implies, to that extent, the power to sell. 'Heggiev. Buildin;^, etc., Associa- *Union, etc., Association v. Ma- tion, 107 N. C. 581. sonic Hall Association, 2 Stew. 389. ^Wangerien v. Aspehl,47 Ohio St. s^j^ssey v. Citizens, etc., Associa- SiO. tion, 22 Kan. 624. 'lb; State V. Building Associa- "Manufacturers', etc., Company v. ciation, 35 Ohio St 258. Conover, 5 Phila. 18. 56 BUILDING ASSOCIATIONS. Sec. 7. Power to Hold Real Estate. The power to hold real estate is, generally, deMned by statute, and the asso- ciation cannot go beyond the limits there fixed without incur- ring the risk of doing an invalid thing. An association, with- out statutory authority for holding land, might be compelled to take it for payment of a debt, and, in such case, the trans- action would not be annulled, as it is necessary to the manage- ment of its business,^ but the duty of the association would be to dispose of it, as soon as practicable. If land is purchased by •the association beyond its authority, the effect is rfot to dis- Bolve the association,' but the court will declare the contract void, unless it has gone into the hands of a person protected, by law, as an innocent purchaser.' If the transactions still remains between the original parties, they are left by the law as if there had been no contract, but if the rights of an inno- cent purchaser have intervened, he will be protected, and if a loss falls upon the association, a personal liability therefor may attach to its officers and agents.* The scheme of a building association does not contemplate that it become a land company, engaged in buying, selling, or speculating, in land, as apart of its business. If it is invested with those powers by statute, then, of course, it can lawfully avail itself of them, but, unless expressly granted, they cannot be exercised;"* however excepting from this general proposition involuntary con's^yances, such as, titles invested by court decree, or compromise of debt, which, necessarily, follow in the legitimate line of its business. Sec. 8. Power to, Issue Stock to Another Cor- poration. Whether or not a building association has. the' right to issue stock to another corporation and advance money thereon, is not settled by the courts. In England it has been 'Morawetz Priv. Corp. sec. 327. sonal obligation, Taut a purchase 'Hughes V. Layton, 33 L. J. M. C. money lien will be restricted, to 89. the land itself: Faulliner's Appeal, 8Vos V.Cedar Grove, etc., Asso- IIW. N. C ^8. elation. 9 Bull. 194. ^MJHer's Estate, 2 Pearson, 848; *Ia Pennsylvania it is held that Rhoads v. Hoernerstown, etc, As- the curative act of 1878 -will not sociation, 83 Pa. St. 180. validate such a contract as a per- ISSUING STOCK TO ANOTHER CORPORATION. 57 held, that one society has no power to invest its funds with another society,' and it was, also, held that the society had no power to advance money to a joint stock company.' A corpo- ration cannot hold shares in another company as an invest- ment, unless this be the usual method of carrying on its proper business.* The statutes in some of the states provide generally, that no corporation shall purchase and hold stock in another corporation. The reason of this is, that the legisla- ture does not intend, that the capital of a company shall be di- verted from its declared purposes by investment in stock of other corporations. In building associations, the reason of the rule fails, and, therefore, the rule will not apply unless the statute, specilically, prohibits the association from receiving other corporations into membership. The issuing of stock is' a device in a building association by which a loan is made. The stock is one of the instruments of the loan. Onl}' by holding it, unless there is special statutory authority, can the loan be granted. Stock is therefore taken for that purpose. If the other corporation has power to borrow, it has the rio-ht tQ do those things needed to perfect the loan. If it borrow from a building association, one of those things is to hold stock. None of its capital is thereby withdrawn, its pay- ments on the stock are payments practically on the loan and its cost. For the purpose of borrowing, it would seem upon sound reasoning, that a corporation may, lawfully, take shares. If shares are taken for investment, an entirely different ques- tion is presented, and the reason of the statute would apply, and its operation would be invoked. The association would then have no power to issue the stock. 'Iq re Durham Co., etc, Society, ^Morawetz Priv. Corp. sec. 431. 25 L. T. Rep. N. S 8 5. *Hardy v. Metropolitan, etc., Com- pany, L. R., 7 Ch. App. 427. CHAPTER Vin. EIGHTS OF MEMBERS. Section 1. Legal status of mem- bers. Section 2. Preferential stock. Section 3. Paid up stock. Section 4. Members aud offi- cers must observe rules. Section 5. Members' rights to inspect books. Section 6. Member as an in- vestor. Section 7. Payments. Section 8. Right of withdrawal. Section 9. Manner of with- drawal. Section 10. Legal status of withdrawing member. Section 11. Liability of with- drawing members. Section 12. Rights of withdraw- ing members of insolvent associa- tion. Section 13. Right to withdraw limited to present funds. Section 14. Stock pledged can- not be withdrawn. Section 15. Amount withdraw- able. Section 16. Construction of by laws concerning withdrawals. Section 17. Transfer of shares. Section 18. Forfeitures. Section 19. The legal status of member as a borrower. Section 20. Duty of association to loan its money. Section 21. Selection of bor- rower. Section 22. Methods of pre- mium charges. Section 23. Auction premiums. Section 24. Premium fixed, un> changeable. Section 25. Premium charge- able to maturity only. Section 26. Formal application^ for kian. Section 27. Appraisement. Section 28. Abstract of title. 58 LEGAL STATUS OF MEMBERS. 59 Section 39. Intert^at not collect- able on interest and premium. Section 30. ments Section 31. or bond. Section 33. gage. Section 33. Payment of instal- Provisions of note Provisions of mort- Complaint upon bond or mortgage. Section 34. Loans to outsiders. Section 35. Loans to married women. Section 30. Mortgage covenants. Section 37. Application of pay- ments. Section 38, Assignment of shares as collateral security. Section 39. Payments on stock not to ipso facto payments on loan. Section 40. Payments on re-as- signed stock. Section 41. Assigned shares cannot be credited. Section 43. Liability of borrow- er under his mortgage for losses. Section 43. Acknowledgement of mortgage. Section 44. Leases by the asso- ciation. Section 45. Satisfaction of mort- gages. Section 46. Borrower entitled to set off. Section 47. Amount payable upon foreclosure. Section 48. The English rule. Section 49. Rule laid down upon voluntary repayment. Section 50. Uncertainty of the foregoing rules. Section 51. The natural and logical rule. Section 53. By laws should pro- vide for record cancellations. Section 1. Legal Status of Member. In consider- ing the lescal status of a member, we have reo^arded him as occupjin^^ the general position of stockholder in a corpora- tion, with moditied rights and liabilities to suit the peculiar nature of the institution. As a stockholder he is either an investor or a borrower. Every member of the association, from the moment he joins, becomes a debtor to the associ- ation, and every member remains a debtor until the full amount of the shares for which he subscribed, and became the holder of, is paid, unless his membership is terminated in a legal manner.' And default by any other member will not relieve him from his liability.' Being iixed as a debtor, he remains such until his stock is matured, unless he chooses to 'Michigan, etc., Association v. JIcDevitt, 77 Mich. 1. 'Hoboken, etc., Association ▼. Martin, 3 Beas., N. J. 427. 60 BUILDING ASSOCIATIONS. terminate his membership. And a person can be both a shareholder and creditor of the association; as shareholder he is liable for his proportion of losses, but as creditor, he is entitled to recover the amount due him, independently of all losses.' Sec. 2. Preferential Stock. The building associ- ation idea implies absolute co-operation. In the absence of statutory authority, there should be no preferential members. Common strength is increased strength, and by the plan of depositing in one treasury the savings of many people for the common benefit of all, any one depositor receives benefits not attainable by his own unaided efforts. It is a part of the scheme that all members shall share equally in the profits, according to their stockholdings; unless the statute provides otherwise, the net profits should attach pro rata to all the shares. In event of dissolution, the assets must be distributed equally among the members, subject, of course, to the payment of debts, and if there is a reserve fund, each member is entitled to a pro- rata share upon distribution, whether he is a borrowing mem- ber or not.^" If the directors distribute profits in any other way than contemplated by law, they become personally liable to an injured member. Sec. 3. Paid-up Stock. In England, and in some of the States, building associations are permitted under restric- tions, to issue paid-up stock; i. «., stock where the full face value is paid up at the time of issue, or has matured by the periodical payments and the profits, and upon this stock fixed interest dividends are paid.' The issue of this stock depends upon the creative statute. If it is authorized, and no interest is fixed by statute, it should receive only a limited share of 'Henninghausen v. Fishor, 50 1., Pa., 123. When the constitution Md. 583. provided for payment to a non bor- ^People V. Lowe, 117 N. Y. 175; rower specified rates of interest on Seibel v. Building Association, -IS -withdrawals, -without including the Ohio St. 371. A by-law giving to borrower; held the borrower -was •withdra-wing stock 5 per cent inter- entitled to the same rate of interest: est, applies to borrowing as well as People's, etc.. Association v. Furey, non-borrowing stockholders: Win- 20 Atl. R 890. terer v. Building Association, 44 L. -Davis Building Society, 18. PAID UP STOCK. 61 the profits, and it should be kept in a safe ratio with the assets. The only motive in the issue of this stock should be to acquire money to meet the demands of proposing borrow- ers. In some associations, where the borrowers are numer- ous, directors may be com])elled to go into bank, and get a temporary loan to satisfy demands that exhaust the ordinary receipts. They may have to do this in order to remove dis- satisfaction amona: the members. In associations accumulatinor idle money, paid up stock would be superfluous and it should not be issued. An income to the association is secured by this stock from* another class of shareholders, and the rules should be so drawn that if at any time the demand from borrowers be light, the association may compel a withdrawal by paying off the stock in the order of its issue. The rule is a safeguard to the association and entirely just. Paid up stock should not be allowed as the predominating stock. It is a source of strength to the association if limited by the demands upon the associa- tion, but its unlimited issue might prove a weakness. Stock of this character forms an exception to the rule of equal dis- tribution and should not be entitled to share in the proHts be- yond the lixed dividends.* 'There is an honest diversity of ed some equitable features, testify opinion among building association to its value as the present act of managers as to the propriety of an Parliament authorizing its issue is association issuing paid up stock. the result of their efforts. The objection urged by its oppon- In the early history of building ents is, that it allows capitalists to associations, the borrowing demands invest their money at oppressive in- were not heavy. The members will- terest rates, to be paid by the poor ingly waited their turns to receive home-seekers. This objection would money, and, in fact, the receipts be forcible when an association often exceeded the loans. But in placed such stock on the same foot- present day associations the constant ing so far as profits are concerned, pressure of borrowing members as other stock, and paid its pro rata compels elasticity of the original part in cash. But its issue is cer- scheme. When the association is tainly helpful to an association unable to supply the demands from when temporarily in need of money its ordinary receipts, it must either at a cost not exceeding the legal satisfy them by borrowing, or secur- rate of interest, under the restric- ing, investing mcmey or lo^e an op- tions given in the text. English so- portunity to secure a borrower who cieties, from whom we have borrow- may not apply when the money ac- 62 BUILDING ASSOCIATIONS. Seo. 4. Members and Officers Must Observe Rules. "When a person becomes a member, he thereby obh'gates himself to conform to the laws of the society. He shonld be given a copy of all by-laws and rules in force, and that is notice to him of their contents. Thereafter he cannot excuse himself of his ignorance of the regulations. And after acting as a member and enjoying the benefits of the association under its bylaws, the law will not permit him to question the legality of its by-laws.* The members being subject to the regulations have a right to expect and compel the officers of the association to observe the regulations. If the officers fail or refuse to carry out the rules, they are blameable and a personal liability may attach to them. So if the officers act contrary to the rules and expend the money of the society in an unauthor- ized manner, they may be compelled to replace the money.' Sec. 5 Members' Rig^hts to Inspect Books. Mem- bers are entitled to inspect the books of the association for proper purposes, at proper times, and they are entitled to such inspection though their only object is to ascertain whether their affairs have been properly conducted by the directors or managers. The right exists, although its exercise may be inconvenient to the officers^. Sec. 6. Member as Investor. Although the original plan of a building association contemplated that each member should ultimately become a borrower and in some states it is still made obligatory for relief therefrom to be purchased, by a penalty,* yet a member is to be regarded as an investor. He, thereby, assumes duties and acquires rights that are not cumulates. If this relief is prohib- ited, premiums naturally go exor- bitantly high, and the borrower is the sufferer, and it is unlawful to stifle competition in bidding, by lim- iting the premium. See sec. 23 post. So by letting in this money under safe restrictions, the con- gested condition of the associa- tion is relieved without injury to any member and with great benefit to many. 'Building Association v. Arbeiter Bund, 6 Bull, 823 ; Building Associa- tion V. Minnick, 1 Kulp, 513 ^Grimes v. Harrison, 28 L. J. Ch. 823. ^Huylar v. Cragin, etc., Company, 40 N. J. Eq. 392. •*In Maryland this is required by some associations. PAYMENTS. 63 removed, though modified and increased by the fact that he becomes a borrower. When a person becomes a member, he is a debtor to the association until his stock matures,* and suit may be main- tained against him for monthly dues.^ Some doubt was expressed in England as to whether it was lawful for an asso- ciation to receive money from members who did not wish to lake loans, but merely wished to allow their monthly pay- ments to accumulate at compound interest until the dissolu- tion of the association, but it has since been decided to be lawful.* The practice is general throughout the United States, to provide for the investing class, persons who never contemplate borrowing, but who deposit their surplus in the association for safety and profit. The rights of an investor are different in different associations. In the serial and per- manent associations their rights are unlike, and in associations of the same type they may vary. In some states, paid up and deposit shares are issued; while, in other states, but one kind of installment stock is issued. It would be futile to enter into an investigation of the different rules for invest- ing: members under these varied conditions. Their rights acquired in such societies are determinable from the laws and rules of each particular association as authorized by the incor- porating statute. Sec. 7. Payments. Payments of money by the mem- bers should be made to an officer authorized to receive them;' otherwise if there is loss the association is not bound to credit the payment in favor of the member. If the by-laws make it the duty of the secretary to receive money, payment at his place of business is valid.' •Michisran, etc., Association v. Mc- cer of the association to apply to a Devitt, 77 Mich. 1. member for his subscriptions at the ^Association v. Kribs, 7 Leg. & proper time and in accordance with Ins Rep. (Pa.) 21. the rules, will not excuse default in ^Davis Building Society, 264. the payment by the member: Tay- *Doe d Morrison v. Glover, 15 Q. lor v. Collins, 46 L. T. Rep. N. S. B. 103. 16S. *Kilpatrick V. Association, 119 Pa. *Schutte v. California, etc., Asso- St. 30. And the neglect of an offi- elation, 23 Atl. Kep. 336. 64 BUILDING ASSOCIATIONS. Sec. 8. Right of Withdrawal. One of the most im- portant rights conferred upon a stockholder is the right of withdrawal. This right is incorporated in all statutes. A distino-uishing difference between the stockholder of a build- ino- association and the stockholder in an ordinary private corporation is the right of the former upon giving notice to terminate future liability on his stock. He can arbitrarily divest himself of his membership, cut loose from the associa- tion, and end his duties and liabilities. In an ordinary cor- poration, a subscriber for stock cannot obtain a cancellation of his subscription except by the unanimous consent of the other subscribers, and then he could not do it if there were credit- ors whose rights would be jeopardized. Even a majority of the stockholders cannot withdraw and refuse to proceed fur- ther in the corporate enterprise; and these rules are said to be just and based upon a sound public policy.' The liberality of the legislative policy can be readily seen, in making such a radical change in the law of corporations by investing the building association stockholder with the personal right of withdrawal. It being considered in other corporations highly essential to retain the stockholder, it would seem that the legislature never intended to permit a full, unconditional with- drawal and consequent termination of all liabilities. Such important modification of established rules must necessarily^ even in a building association be attended with some wise restrictions. Sec. 9. Manner of Withdrawal. The by-laws should prescribe the manner of withdrawal, and in this they generally but re-enact the statute, as it usually defines the right. The withdrawing member should be required to give a written notice" of his intention to withdraw. That notice should be »Cook Stock, etc., sec 169. cess as the trustee of a member at "The written notice may be the withdrawal value of his shares, waived by the association and an although he has given it no notice oral notice accepted: McKenney of his desire to withdraw such V. Diamond State, etc , Association, shares: Atwood V. Dumas, 14J> 18 Atl. K. 905. A co-operative Mass. 167. bank is chargeable in a trustee pro- LEGAL STATUS OF WITHDRAWING. 65 served npon the secretary some time before the money is ex- pected, and should be entered by hira on a book kept for that purpose. The amount to be paid upon withdrawal is a diffi- cult question, unless the statute determines it, since the enter- prise has no certain prolits until It is wound up, as there may be losses, idle money, unforeseen expenses or lower premiums or interest, while the association may be completely successful and yield a larger return than calculated. It is inequitable to allow him to take out all the profits accruing upon his shares, as the continuing members take' all the burden of the loans upon which the retiring stockholder has received his full share of profits. The association should, therefore, retain a part of the profits. The withdrawal value should be adjusted by the directors upon the time of the membership. If the member retires early in the life of the association, his share should be small, with proper increase as the time of the withdrawal more nearly approaches maturity of stock. In ascertaining the withdrawal value, another element, is to be considered, and that is the earning capacity of the association. An arbitrary rule might be unjust in some societies, as approaching too close to the per cent, of earnings. A general rule might, therefore, be unjust when applied. If one coald be formu- lated it would be to repay the dues paid in, less expenses and losses, with the legal rate of interest for the average time. This rule might militate against the association in early with- drawals, but it w;ould be compensated when the withdrawals were late and left a large surplus profit. Sic. 10. Legal Status of Witlidrawingr Member. When a member gives notice of withdrawal he stops paying dues. He has determined that he will no longer carry hisi payments, and the association is bound by that determination. His character as debtor is at once reversed, and he becomes a creditor to the amount of his legal claim and is entitled to recover as such.' But he is not entitled to recover the value 'Builf]ing Association v. Silver- ation, 19 "W. Va. 792. See Wittman man, 85 Pa. St 394; Building Asso- v. Building Association, 7 W. N. C. ciation'3 P:state, 12 W- N. C. 207; 80. Haigk V. United States, etc., Associ- 66 BUILDING ASSOCIATIONS. of the stock,' nor its par value even thons^h it has matured,' but only the withdrawal value as fixed by the by-laws or rules. A complaint to recover thereon must show a compliance with the by-laws in withdrawing, and that payment was refused. And he cannot enforce his demand without showing funds in the treasury, or that the directors consented to such applica- tion.' The authorities are somewhat confusing in their views of him as he stands in this position. Some hold him as a member; others divest him of membership and qualify him as a plain creditor. In truth he has the attributes of both. As ar^ainst the other members he is a creditor of the associa- tion; but he is not an ordinary creditor, since he cannot come in competition with outside creditors. Their claims must ba satisfied before his; but as against the continuing members he is entitled to be paid the amount due him before they can di- vide the assets. Sec. 11. Liability of Withdrawing Member. In the sense given in the last section, the withdrawing member is a creditor,* but so far as the by-laws and rules are con- cerned, he is in a sense a member until payment' and he is bound by them. So that he is held under the by-laws for all liability incurred prior to the notice, coming to the knowledge of the society after the notice had been given. But lia- bilities incurred after the notice is received by the association cannot be imposed upon him. While he continues a member and subject to the by-laws for some purposes, yet he is not 'Laurel Run, etc., Association v. is liable for his proportion of losses^ Sperring, 3 Kulp, 67. but as creditor he is entitled to re- "Building Association v. Sperring, cover the amount due him indepen- 106 Pa St. 3i4. dently of all losses, as the babinces 'Texas, etc.. Association v. Kerr, assigned by ^vithdra-wing members 13 S. W. Rep. 1020. must be presumed to have been ^See also //ire Blackburn, etc., So- ascertained, after allowing all de- ciety, L. R. 24 Ch. D. 421; Sibun v. ductions to which the withdrawing Pearce, L. R , 44 Ch. D. 354; Wright mfmber, assignors, were then sub- V. Deley 4 11. & C. 209. In Hen- ject or liable. , ningliausen,et al.,v. Tischer,50Md. 'Walker v. General Mutual, etc., 583, it was held that a person can be Society, L. R , 36 Ch. Div. 777, 786; both shareholder and a creditor of Biburnv. Pearce, L. R., 44 Ch.D. 35i the corporation; as shareholder he RIGHTS OF WITHDRAWING MEMBERS. 67 subject to dues and fines after notice to withdraw. The society retains his membership until he is paid, for readjusting of any liability that may legally attach to the stock before the actual retirement. After he has been paid off, on his withdrawal, and there is a final settlement between him and the society, in the absence of mutual mistake or fraud, he cannot be compelled to make good a deficiency occurring before the withdrawal and discovered before the winding up of the association'. In order to remove any doubt as to the liability of withdrawing members for losses, the by-laws should explicitly and clearly define it. Where a by-law provided that a withdrawing mem- ber was "entitled to receive the amount actually paid in by him, less all fines, interest, insurance, due from him with aver- age interest at the rate of 6 per cent per annum," the court refused to allow losses because they did not come under any of the heads mentioned in the by-laws." While he would be equitably chargeable with all losses incurred prior to the not- ice, the amount withdrawable is a proper subject for the by- laws and the liability for such losses should be carefully pro- vided for. The withdrawing member is not bound by new rules made after he has given notice to withdraw.' He may sell and assign his shares, or rather his claim, and the pur- chaser takes them subject to all liabilities, just fts a purchaser before withdrawal becomes liable to the duties of a share- holder.* Sec. 13. Rig^hts of Withdrawing' ^leinbers of Insolvent Association. While a withdrawing member is in a sense described a creditor of the association and can obtain judgment, yet when the association was insolvent at the time of his withdrawal, he cannot compel payment of the money due from the association to the exclusion of claims of general creditors, or those of his fellow stockholders,* for if the '/ti re West Riding, etc.. Society, *Handley v. Farmer, L'9 Beav. 362. L. K., 45 Ch. Div. 463. *Hanney v. Building Association, *j\IcKennpy v. Diamond State, IG W- N. C. 450. etc., Association, 18 Atl. Bep. 90.1. 'Armitage v. Wallier, 2 Jur. N. S. 13. 68 BUILDING ASSOCIATIONS. society is known to be insolvent althonfrh proceedings may not have been taken to wind it up, the withdrawing rules cannot be invoked.' But the association cannot withhold a part of his withdrawal on the ground of apprehension of ultimate insolvency of the association, because of the liability of the member to contribute,' yet he cannot withdraw without considering losses,^ though they are probable,* nor necessary expenses.^ The association ordinarily has no right to retire stock before the terminating period and force out the stock holder against his will, so long as he performs his duties.' Sec. 13. Kiglit to AVitlidraw Limited to Present Funds. The right of members to presently withdraw depos- its, is practically limited to funds on hand.^ And the with- drawino' member must show that there are funds for that purpose before he can enforce his demand, but it is an abuse of discretion for the directors to so invest the entire funds in real estate so as to leave none applicable to the payment of with- drawing members, and thus defeat their rights.* When notice of withdrawal is given the association, it should arrange the disposition of its receipts so as to meet its pay- ments when due. "While the right to withdraw is only grant- able out of fund-s designated for that purpose, it is not intended that ri<>-htful lack of funds shall defeat the right as against the members. So, if the association is solvent and a member gives notice of withdrawal, and the notice had matured- before the association is being wound up, he is entitled to be paid out of the assets, after outside creditors, in priority to those mem- bers who had not given notice, notwithstanding the fact that '/n re Sunderland, etc., Society, 24 *McGrath v. Hamilton, etc., Asso- Q 33 uiv 394. ciation, 44 Pa. St. .383. ''Junskuntz v. Building Associa- ^Ber'^man v. St. Paul, etc., Asso- tion, G Bull. 428. tiation, 29 Minn. 275. sFriel V. Association, 1 Leg. Rec. 'State v Redwood Falls, etc Asso- Rep. (Pa.) 217- ciation, 45 Minn. 154. ^Knoblanck v. Building Associa- ^National, etc, Association v. tion, 25 P. L. .J. 89 ; PatJert v. Build- Hubley, 34 Leg. Int. 6. ing Association, 25 P. L. J. 40 The probable loss may be ascer- tained by an appraisement. I TRANSFER OF SHAREb. 69 after he had given the notice, there were no funds for pay- ment,' The intention of the rule is to prevent the application of the funds to withdrawals to such an extent that its operations will be crippled; and when it winds up, the reason of the rule does not apply, which readily defeats the application of the rule itself. Sec. 14. Stock Pledged Cannot be Withdrawn. When a loan is made to the member his stock is pledged as collateral security. The right to withdraw is thereby curtailed to the extent that he pay off his loan before he can with- draw.' Sec. 15. Amonnt Withdrawable. The withdrawal by the member includes only his credits on his stock. So, under an ordinary by-law for withdrawals, he is not entitled to have premium, interest, lines, transfer fees or charges of that char- acter refunded to him.* Sec. 16. Construction of By-Laws Concerning Withdrawal. Tiie by-laws providing for withdrawal, are favoral)ly construed for the member, but any privileges therein given, if not taken advantage of by the member as therein specihed, are forfeited." And if the by-laws provide that no money is to be paid on a withdrawal unless the pass book is produced, its production is a condition precedent to pay- ment.' Sec. 17. Transfer of Shares. The by-laws should pro- vide for transferring of stock by a shareholder. The certificate of stock should have a blank assignment indorsed on it, to be acknowledged before the secretary, or a power of attorney to the transferee to make the transfer, and the by-laws usually provide that upon payment of a transfer fee, the secretary shall 'Walton V. Edffe, L. R. 10 App. ^Socurity, etc., Association v. Cds. ;i3; lire J\Iid(llesbroui,^h, etc., Lake, 00 Ala. 45 (i. Society. 53 L. T N. S. 203; In re ^Fuller v. Salem, etc., Association, Blackburn, etc.. Society, L. R , 24 10 Gray 94; Booz's Appeal, 109 Pa. Ch. Uiv 4'?1 ; In re Mutual Society, St 592. 24 ('h D. 42.i. 'Atkinson v. Bradford, etc., 8o- *Building Association v. Sperring, ciety, L. li., 25 Q. B. Div. 3?7. 106 Pa. St. 334; State v. Red Falls, etc., Association, 45 Minn. 154. 70 BUILDING ASSOCIATIONS. enter the transfer upon the books of the association.* The title will pass by an assignment of stock, without transfer on the books of the association, but until the transfer is so entered the transferrer as against the association, and creditors of the association, is liable on the stock.' The association, with knowledge of the assignment, may choose to accept the trans- ferree as a member, but the legal liability to do so, does not attach until there has been a transfer on the books. The offi- cers of an association are not liable where they divided the assets among those whom the books show to be stockholders, to one whose name does not appear on such books, but who held certificates assigned to him with power of attorney to transfer.' However, the directors should not, as a matter of precaution retire any stock without the certificates being sur- rendered to the association, but in declaring dividends, they would be justified in giving them to the stockholders shown by the books. A transfer of stock properly effected, will not relieve from accrued liability, but only from future liability. A by-law that no stockholder shall be permitted to transfer his stock while he is in default, is valid.* A building associa- tion's rule that each member on transferring his shares to another shall pay to the association a transfer fee on each share, has no application where one who has subscribed to a number of shares in his own and others' names, and seeking to exercise his right of withdrawal on all, produces proper vouchers from such others for payment.* When the association refuses to transfer shares, the general weight of authority is that mandamus will not lie to compel its transfer, and that the proper action is for damages." 'The transfer fee is enforceable : McGannoa v Central, etc., Associa- tion, 19 W. Va. 726. 'Cook Stock, etc., 260. •Bank of Commerce's Appeal, 73 Pa. St. 59 In a case where the reg- istered holder of shares held in trust for plaintifl: who held the certifi- cates and such trustee was allowed to withdraw the shares without pro- 'ducing the certificates, it was held the society was not liable to transfer the shares to plaintiff: Nolloth v. Simplified, etc. Society, 58 L. T. N.3. 859. •'Cunningham v. Alabama, etc, Company, 4 Ala. 65'i. ^Building Association v. Hender- son, 3 Bull. 3S6. «GalbrHith v. Bldg. Ass'n, 43N. J. Law, 3S9 ; Cook, Stock, etc., sec. 289. THE LEGAL STATUS OF MEMBER. 71 Sec. 18. Forfeitures. Almost all associations provide that in case of a certain number of defaults in his payments, the mem- ber shall forfeit his membership. The right of an association to declare a forfeiture of stock for non-payment of dues, etc., must be clearly authorized by the charter or general incor- poration laws;' it cannot be created by by-law.' A power of this character must be constructed strictly, and the validity of the forfeiture depends upon a strict compliance with the law.' Forfeitures are not favored in law, and the right must be ex- pressly conferred and exercised in accordance with the granted power. But if the forfeiture is authorized, the courts will not relieve a member for a willful neglect of his duties,* and he cannot recover back the money paid on his stock after it has been forfeited for non-payment of dues, and assessments, where such forfeiture is authorized by the charter of the association.* No notice, unless there is one prescribed by the charter or by-laws, is necessary' before declaring the forfeiture." When the association holding the bond of a member forfeits his membership and proceeds upon the bond, it can only recover the amount actually advanced with interest, deducting payments.'^ The association having declared the borrower no longer a member, can only enforce against him as though he were a stranger. The most' equitable plan in case of default, after the imposi- tion of tines becomes ineffective, is to provide, after a certain time upon failure to pay all back charges, for a compulsorj withdrawal, deducting such charges. Sec. 10. The Legal St at vis of Member as a Bor- rower. When the association has accumulated funds suffi- 'Cook Stock, sec. 123; Perrin v. *Freemanv. Ottawa, etc., Associa Granger, 30 Vt. 595 ; Henderson, etc. tion, 114 111. 183. AssociMtion v. Johnson, 10 S. W. "Holmes v. Smythe, 100 Dl. 413; Rep. 787. Freeman v. Ottawa, etc., Association, 'Master Stevedores' Assnv "Walsh, 114 111. 182. 2Daly, 14 ; Rosenback v Salt Sprinsjs, 'Ibid etc., Bank, 53 Barb 506 ; In re Long 'Bechtold v. Brehm. 26 Pa St. 269 ; Island, etc., Company, 19 Wend. 37. Denny v. We.st Philadelphia, etc., ^Germantown, etc, Company v. Association, 39 lb- 154; Premium Filler, 60 Pa. St. 124. Fund Aasociation's Appeal, lb. 156. 72 BUILDING ASSOCIATIONS. cient to loan, a member under its rules may become a borrower. Upon receiving a loan, the member has increased obligations. In order that the rights and duties of the borrower may be understood, his legal status should be defined. The borrower is sometimes called an advanced, prepaid or redeemed shareholder. It matters little by what name he is known so long as it is kept in mind that his act of borrowing money does not in law divest him of membership. By bor- rowing, he takes advantage of a right as a member which is vouchsafed to him by the statute. The right to borrow is inseparately connected with his membership; it flows naturally from that endowment. To say that he loses his membership upon becoming a borrower is to assert that the assumption of a right effectually destroys its source. And it is equally untenable to say that his status as a member is modified by borrowing. When a member bids for an advance on his shares, he asks for a loan. Stripping the transaction of all devices as "advance on" or "redemption of" shares, it is the act of the association lending to its member a sum of money to secure the repayment of which the member gives a mortgage and assigns his stock as collateral security. What change is effected in the member's condition? He is to pay dues; that he is already bound to do; he is to pay premium and interest which represent the cost of the loan. So the borrower has not modified his contract, as a member, but he has added ta it the cost- of a right he has chosen to exercise, and has secured the repayment of the money gotten by the exercise of that right. He has not surrendered his interest in the society's assets; neither has he parted title with his stock; he has pledged it with the full right reserved to redeem it at any time. The bor- rower's interest in the assets of the society are unmodified but it is burdened with the pledge. His substantive rights, as a member, remain unchanged, except, he has agreed not to exercise his right of withdrawal as long as the loan is unpaid. His stock matures as the stock of the non-borrowers, "and he shares in losses and expenses. Regarding the borrower as such, in legal effect, simplifies his position and enables us to clearly understand it. So when his stock has matured, the THE LEGAL STATUS OF MEMBER. 73 debt or the loan is still due the association in the full amount, but if he chooses, or the association elects, the stock may be used to cancel the debt. Until that application has been made, his debt is entirely unpaid and he remains the owner of the stock with the lien upon it. But he can compel the association in equity,' if not by the rules, to resort to that lien and exhaust his stock, representing his interest in the distributive assets of the association, before reaching the security given by him, as, if it satisfied the debt, the association must then release the mortgage.' This is the legal status of the member who secures the face value of his shares from the association in advance of their maturity.^ 'Red Bank, etc , Association, v. Patterson, 27 N. J. Eq. ?23. 'Tyrrell, etc., Association v. Haley, 139 Ha. St. 657. "Tlie writer is aware that this view is not in accord with all the courts. In Virginia it is held that borrowing extinguishes the mem- bersliip. and, coosequentiy, the bor- rower is not entitled to participate in the final division of the funds: White V. Mechanics, etc , AsstKua- tion, 22 Grat. 233; Winchester, etc, Association v. Gilbert, 23 Grat. 787. But he is yet held by the court to his covenants as a party to the articles of association, and to make his regular monthly payment of dues and tines, obligations secured by his mortgage. As has been said: "Observe th»j inconsistency; he has lost his membership but is bound as a mt mber to the duties of mem- bership, and has even put himself under bonds to be a good member.'' Eadlich Building Associations, p. 18.J. Ttie better rule sustained by the courts is to regard the advance as a loan: Pfeister v. Wheeling, etc.. Association, 19 W. Va. C76; Mills V Sali>bury, etc, Association, 75 N. C 292; Lincoln, etc.. Associa- tion v. Benjamin, 7 Neb. 181; Mar- tin V. Nashville, etc., Association, 3 Cold. 418; Gordon v. Winchester, etc.. Association, 12 Bush 110; Securit}', etc. Association v. Lake, 09 Ala 456. In a Maryland case it is held that advanced or prepaid members are obliged to pay inter- est on the sum advanced besides their weekly dues — they have not ceased to be members by the pre- payments, but continue to hold an interest in the management and success of the association, as upon thatdependstheir earliest relief, not only from the payment of the weekly dues, but their final release from their mortgage. Tlie unpaid memtiers are not absolved from the punctual payment of weeklj' dues. They are entitled to any residium of profits, the exclusive interest in which has been devolved upon them by virtue of the contract, Willi the prepaid members, through the act of the coinpan}'^ lurnishing the equivalent consideration. Both are interested and under mutual ob- ligation to contribute to the accu- mulation of the common fund by the payment of their weekly dues, until the time provided for iis final distri- butii m and settlement : Lister v. Log Cabin, etc., Association, 38 Md. 120. 74 BUILDING ASSOCIATIONS. The member as a borrower is still a member with all his rif^hts, except as pledged. He may vote,' hold office, transfer his shares subject to the lien, and in fact do everything an- other shareholder may do. Sec. 20. Duty of Association to Loan its Money. When the association accumulates the amount of a share it then becomes its duty to loan it, and not only is it a duty to the state that created it for the purpose of lending to its members, but it is a duty to the members, as through the earning power of its accumulations does the association expect to realize the profit which is to assist in maturing its stock. Sec. 21. Selection of Borrower. The next step is to select a borrower among its members." The most equitable way to make this selection, as determined by experience, is by providing for bidding among the mem- bers for preference of the loan. The method, is usually, to offer a sum upon the auction plan, and the highest bidder pays whatever amount he feels justified in pay- ing for the privilege of getting the money. This he pays in addition to interest. Evenings are most conven- ient to the shareholders for the sales of money, who are generally employed during the day. The president of the association is the officer who acts as auctioneer, but any officer present may do so. Upon a bid being, received which is the highest, the secretary takes a memorandum of it with the name of the bidder; additional sums, if any are offered, in the same manner. The by laws should provide for a penalty in a small amount for failure to take a loan after bidding it in. These sales should be conducted upon fair principles; by-bidding, especially from a director, should not 'In Michigan, by statute the ri,£;lit «In some states associations are to vote is withheld, although he re- permitted to make Joans outside of mains otherwise a member: Mich- their membership, but from the na- igan, etc. Association v. McDevitt, ture of the scheme, all borrowing 77 Mich. 1. memb-Ts should be satisfied before loans are made to other persons. METHODS Of PREMIUM CHARGES. 75 be tolerated. If the member feels such tmfairness is being practiced upon him, he can injure the society before its mem- bers and outsiders. Sec. 22. Methods of Preinium Cliarg^es. The pref- erence so paid is called (generally the premium, and the man- ner of its payment varies in different associations. The manner of chai-ging premiums has been measurably changed since the earlier societies. Tlie old plan of de- ducting the full amount of premium at the time of making the loan was the prevailing method at one time, and ia still practiced in some localities. For instance if a bor- rower paid 25 per cent, on a $2,000 loan, he received $1,500 in cash and paid full interest on the $2,000.' In some states this method was invalidated as usurious, while in others it was upheld. These associations, to prevent inequality in the cost of money, adopted the minimum premium plan, requiring all bidders to pay at least a certain premium. When the bor- rower desired to repay his loan the face value was not re- quired, i. e. from the $2,000 he was allowed a rebate of pre- mium having reference to the unexpired time. The system has generally been found so complex in the keeping of its ac- counts and so uncertain in its earnings that it has been modi- lied in many states, and entirely superseded in others.' One modification of this plan was to give the borrower the face of the loan, less his bid, and to charge interest on the net loan only. It involved the same intricacies as the other plan, and has not been generally adopted. The most popular system throughout the United States is that by which the borrower pays with his installments his interest and premium. If the borrower desires to repay his loan, he only pays premium up to the time of repaying his loan. This system is simple to the ^It has been recently held that etc., Association v. Tascott, 28 N. E. in an association operating under Rep. (Ill) 801; Affirming Tascott v this plan, a stockholder who had Mutual, etc., Association, 37 111. bid 25 per cent premium for a loan App 274. of $100 was entitled to receive .$80, ''The statute of Indiana in force since the per centage of the pre- contemplates this style of an asso- mium is to be computed on the act- ciation,butthey are not received with ual sum. received by him : Mutual, as much favor as the newer plans. 76 BUILDING ASSOCIATIONS. borrower, which is a strong point, and it lays a less heavy bur- den on him, lessening the amount of the premium and making its payment easy. In T^ew York, the premium is charged aa a bonus, is so understood by the borrower, and is then deducted from the loan. He gives security for the face of the loan and pays interest on that. The premium is settled; there are no rebates, and with this understanding the borrower governs his bidding, and there is a consequent tendency to lower the bids. The merit of the plan is in impressing upon the borrower that the premium is a bonus for the preference in the use of money. That is the true function of premiums. Primarily, the association uses the method of charging premiums to make an equitable selection of a borrower; and secondarily, to make aprotit; but premiums should be bid by borrowers on the theory that they are paying that much for the right to have the money over fellow stockholders. There are many differ- ent schemes for charging premiums indigenous to different localities, but those outlined are the general ones.^ To an un- informed mind, this additiorial cost of money, in the charge of premiums, seems an exorbitant cost, but in view of the profit attaching to the borrower's stock with which he can pay the debt, the apparent cost is materially reduced and it is not op- pressive. In charging premiums the association should be guided by the statute. If the premium charge is not author- ized by the statute, and it increases the cost of the loan be- yond the rates of interest fixed by statute, it is usurious and void,^ but if the statute authorizes the charge, then usury laws do not apply .^ 'An invest! fjator in this line will consult Dexter's Co-operative iSav- ings and Loan Association, pp. 70 et spq. 'Citizens', etc Company v. Utiler, 48 Md. 455. ^H(mie, etc , Association v. B'^ning, 7 Bull. 174; Montgomery, etc. As- sociation v. Robinson, (19 Ala. 413; Security, etc. Association v. Lake, 63 Ala. 45a. Note. In some courts the trans- action of an advancement is treated as of a partnership character: Sil- ver v. Barnes, 6 Bing N. C 180; Burbridge v. Cotton, 8 Eng. L- & Eq. R. 57; Seagrave v. Pope, 15 Eng. L. & Eq. 477; Robertson v. American, etc. Association, 10 Md. 397; yhannon v. Howard, etc Asso- ciation, 36 Md. 3S3; Lister v. Log Cabin, etc. Association, 38 Md. 115; METHODS OF PREMIUM CHARGES. 77 Sec. 23. Auction Premiums. Tlie manner of chare:- ing the premium by auction of monej- is the one usually contemplated by the statute, and is more in harmony with the general scheme. The power of determining its cost is thus placed with tlie borrowers themselves, and the managers can- not impose upon them an arbitrary rate. If the statute shows that this method was the one intended by the legislature, the courts require compliance with it. So, under statutes providing that money on hand shall be sold to the member who will pay the highest premium for the preference in taking the loan, the bidding must be competitive and the directors cannot Williar v. Baltimore, etc. Associa- tion, 45 ]\ld. 54f); Massey v. Citi- zens, etc Association, 23 Kans (j24; Delano v. Wild (i Allen, 1; Clarks- ville,etc. Associati nv. btephens, 26 N.J. Eq 351; Shannon v. Dunn, 43 N. H. 191; Bibb County, etc. Asso- ciation V. Richards, 21 Ga. 51)2; Par- ker V. Fulton, etc., Association, 4G Ga. 166; Patterson v. Albany, etc, Asso- ciation, 63 Ga. 373. In these cases it was held the question of usury is to be left to the jury, and if it is found that the organization is not intended to evMde the u.-.ury laws, but has for its purpose the accumulation of montlily savings to procure homes, there is no usury in the charge. In other courts the advancement is re- garded as a mere loan: JNIills v. Sidisbury, etc. Association, 75 N. C 292; Overby v. Fayetteville, etc Association, 81 N. CM; Vann v. Fayetteville. etc, Association, 75 N. C. 494; Ltitham v. Washington, etc. Association, 77 N. C .145; Hanner V. Greensboro, etc., 78 N. C. 1»8; Hoskins v. Mechanics, eti".. Associa- tion. 84 N. C. 338; Smith V. Me- chanics, etc.. Association, 73 N. C 372; Columbia, etc., Association v. Bollinger, 13 Rich. Eq. 124; Lin- coln, etc., Association v. Graham, 7 Neb. 173; Lincoln, etc., Ass(iciation V. Benjamin, 7 Neb. 181; Mariin v. Nashville, etc., As'^ociation, 2 Cold. 418; Herbert v. Kenton, etc. Asso- ciation, 11 Bush. 296; Gordon v. Winchester, etc.. Association, 13 Bush, 110; Bechtold v. Brehm, 26 Pa.. St. 269; Reiser v. Wil- liam Tell, etc Association, 39 Pa. St. 137 ; Burlington, etc.. Associa- tion V. Heider, 55 Iowa, 424; Build- ing Association v. Timmins, 3 Phila. 209. In these ca:ses the premium charge is held usurious, being unau- thorized by statute. In unincorpo- rated associations, or in associations without statutory permi.ssion to make a premium charge, it would become a qucNtion whether the transaction was to be regarded as a j.artner!^hip in character so as to take it out of the usury law, or that it was a mere loan falling withia the pale of that law. Thp partnership theory sustained by courts with a liberal and friendly disposition, enabled associations without legislative sanction, to en- force premiums. Premiums have now a more geneJ-al lesri'^lative au- thority, and the transaction is more regarded as a loan In building as- sociation parlance, it is treated as 78 BUILDING ASSOCIATIONS. refuse a bid if the secnrity is properly tendered;' hence they hav^e no right to fix a minimum rate of premium,' but the loan made by the association having a by-law to that effect, but not made in pursuance of such by-law, and unaffected there!)}', is binding on the borrower.' It often happens in actual jiractice where there is a steady demand for money, that horizontal or uniform premiums based upon a just profit to the association, are of advantage to the association, and of more fairness to the members, as all are paying the same cost. In that case, a member's bid at the uniform rate without deceit or compulsion by the association, would be binding, even if the statute contemplated bidding, but if he refused to make a bid so high, the directors have no discretion with sur- plus funds on hand, but to loan him if his bid is the highest offered, and his security sufficient. Sec. 24. Premiums Fixed, Uncliang-eable. But the premium once fixed cannot be afterwards changed. The proportion of premiums which shall be paid each week cannot be increased by subsequent action as to existing mortgages, such, and in law it is logically a loan, since there is a fixed interest and premium charge, with security for full repayment. These condi-. tions are absolute, and their per- formance is required until tlie stock security increases in value sufficient to satisfy the debt, when the associ- tion obligates itself to take it in full satisfaction. It is merely a mode of payment, and if it fails the debt re- mains unpaid and enforceable. The proposition laid down in the text seems to be safe for observance. The conflict in the cases upon the Bubject of premium as usurious has led to the opposite theories of the transaction represented in the two lines of cases cited, but since pre- miums latterly are authorized in nearlj'' all of the states, the views of the courts in those cases cannot ap- ply to associations operating under such statutes. The directors of the association should be guided by the statute in charging premiums, as the power is safely statutory, not- withstanding the partnership theory supported bj^ some courts, and this is the tendency of the recent cases In Illinois, premium is regarded as liquidated damages and not usu- rious: Holmes V. Smythe, 100 111. 413; Freeman v. Ottowa, etc., Asso- ciation, 114 111., 182. It was recently held by the Arkan- sas Supreme Court that as it was un- certain how^much would be paid as interest until winding up, premiums are not usurious : Reeve v. Ladies', etc.. Association, June, '^5, 1893. 'State V. Greenville, etc. Associa- tion, 29 Ohio St. 92. "Stiles Appeal, 95 Pa. St. 123. 'Orangeville, etc., Association v. Young, 9 W.N. C. 251. FORMAL APPLICATION FOR LOAN. 79 unless the constitution and by-laws of the association clearly and unmistakably confer such authority. And where the constitution provides that the installments of premium shall be 50 cents per week for four years, and after that time the directors shall determine the amount to be paid weekly, this lano^uage does not clearly give such authority and will be con- strued prospectively and to authorize a larger weekly install- ment only as to loans made after the change.' Sec. 25. Preiniuni Chargeable to Maturity only. A premium bid for the right of precedence in taking a loan, cannot be collected after the maturity of the loan. So held in a case where the loan was for a specified time, and the premium a percentage on the amount payable periodically." And this is true though the time of payment be extended by renewal or forbearance.' But one premium can be charged upon a loan, so that where after a sheriff's sale on a mortgage, the stockholder received a. second loan, at a higher premium, he is entitled to be repaid his first premium.* Sec. 26. Formal Application for Loan. The amount of premium to be paid by the proposed borrower being determined, it is advisable for formal application for the loan to be made to the association. The application should give the interest and premium the applicant is to pay; the num- ber of shares to be pledged, a description of the real estate offered as securit}'-, including a description of the improve- ments thereon or those proposed to be placed thereon, the market value of the property, its rental value, description of liens, the purpose of borrowing,' the age, residence and occu- pation of applicant. These are chief points to get the security before the directors and the value of reducing this prelimi- 'Burke v. Home, etc., Association, *Tho association is flot required to 7 Bull. 114; Home, etc, Associa- ascertain the use of the proposed tion V. Boning, 7 Bull. 174. loan : Ilagerman v. Ohio etc. Asso- •c^avings, etc., Association v. Stev- elation, 25 Ohio St. ISO, but it is ad- ens, 5 Bull. 113. visable and even necessary in some '^^- states T.'hcre the borrowers are mar- ^Flounders v. Ilawley, 78 Pa. St. ried women. 45. 80 BUILDING ASSOCIATIONS. nary contract to writing, cannot be overestimated, as iu con- troversies between the association and the borrower, it may be the vital point of the whole transaction. Sec. 27. Appraisement. The application should be submitted to competent appraisers, appointed by the directors, and the property personally viewed by them. They should give their written opinion as to its value. The application thereupon becomes a subject of investigation by the board. The report of the api)ralsor3 is merely advisory. The direc- tors then decide upon the facts thus presented, whether or not to grant the loan. Sec. 28. Abstract of Title. Upon the acceptance of the loan, an abstract of the title to the property oifered as security should be placed in the hands of the attorney of the association by the proposed borrower. If the title is reported sufficient by the attorney, then the papers, usually consisting of a note or bond, secured by mortgage or a deed of trust, and such affidavits as may be necessary, should be prepared by the attorney or a skilled draughtsman, and executed by the borrow- er. The association is then ready to pay the money, seeing that all existing liens are paid and satisfied of record. If the loan is a building one, the association must use precaution to see that all mechanics' liens against the property are satisfied and that there are no enforceable claims superior to its mort- gage arising out of the improvements. The surest precaution is to take an indemnifying bond, with sufficient surety, at the time the loan is made. Sec. 29. Interest not Collectible on Interest and Preminm. Building associations cannot collect in- terest on premiums or interest and thus compound it; so under a statute authorizing a deduction of premiums at the time of the loan, interest cannot be charged upon the par value of the shares but upon the money actually advanced.' 'Forrest City, etc., Associntion v. Gallagher, 25 Ohio St. 20-5; RLas. 437. *Williar v. Baltimore etc., Associ- ation, 45 Md. 546; Bates v. Peoples, etc.. Association. 42 Ohio St. 655; Association v. Bollinger, supra; Lin- coln, etc., Association v Graham, 7 Neb., 173; Mills V.Salisbury, etc., Association, 75 N. C 292; Melville V, American, etc.. Association, 33 Barb. 103; Thompson v. Gillison, 28 S. C. 534. But, see Delano V. Wild, 6 Allen 1; Bowker v. Mill River, etc.. Association, 7 Allen, ICO ; however, it was held in a North Carolina case that a borrowing member paying usury, would not be aided, being considered in ^arj delicto: Latham v. Washington, etc.. Association, 77 N. C 145; but this doctrine is generally denied. In or- der to sustain the premium charge not authorized by statute, the Eng- lish courts considered associations as partnership arrangements and such charge not to be within the usury laws: Silver v. Barnes, 6Bing. N. C. 180; Burbidge v. Cotton, 8 E. L. & E 57 ; see, also, Shannon v. Dunn, 43 N. H. 194; Montgomery etc., Association v. Robinson, 69 Ala. 413; Franklin etc.. Association, V. Marsh, 29 N. J. L. 225; Concor- dia, etc.. Association v. Read, 93 N. Y. 474; Merrill v. Mclnlire, 13 Gray, 157; St. Louis, etc.. Association V. Augustin, 2 Mo. App. 123 ; Contra, Reiser v. Wm. Tell, etc.. Associa- tion V. 39 Pa. St. 137; Mechanic's etc., Association v. Wilcox, 24 Conn. 147; Baltimore, etc. Society, V. Taylor, 41 Md; Mills v. Salis- bury, etc.. Association, svpra; Fcrrest City, etc.. Association V. Gallagher, 25 Ohio St., 208. In Parker v. Fulton, etc., Association 46 Ga. 166, it was held as the scheme involved risk of losing the whole or getting less than the legal rate of interest, there was no usury. See, al.»o, Bibb Co., etc., Association v. Richards, 21 Ga. 592. As the stat- utes generally authorize the fi.xing of premium charges, they are taken out of the usury laws and the prin- ciples laid down in the above cases have no application. Premiums when authorized by statute are held lawful and recoverable : Jarrett v. Cope, 68 Pa. St. 67; Franklin, etc., Association v. Marsh, supra; Hoboken, etc., Association v. Mar- tin, supra; Red Bank, etc, Associa tion V. Patterson, 12 C. E. Green, 223; Citizens', etc., Association v. Webster, 25 Barb. 263; West Win- Bted, etc.. Association v. Ford, 27 Conn. 282; Licking Co.. etc.. Associ- ation V. Bebout. 29 Ohio St. 252; Robertson v. American, etc., Associ- ation, 10 Md. 397; Bowker v. Mill River, etc.. Association, supra; Shannon v. Dunn, supra; Massey V. Citizens, etc., Associa'ion, 22; Kans. 624; McLaughlin v. Citi- zens Association, 63 lud 264: Shaff- rey V. Workingmen's, etc., A.ssocia- tion, 64 Ind. (iOO; White v. Mechan- ics, etc., Association, 22 Grat. 233. If there were any precedent condi- tions to a recovery, as that the bor- 104 BUILDING ASSOCIATIONS. the cost of money that will involve nsury; so, where there was an agreement that retiring members of a building association may take out the money they had paid in, and interest thereon, at a certain rate above the legal rate, it was held that it is not open to the objection of usury. Such addition is not interest on money loaned, but an adjudged profit on the money put in/ Sec. 3. Premiums Authorized by Statute. The statutes in nearly all the states, now exempt building associa- tions from usury in charging premium, so that when the cost of the money by the addition of the premium to the interest is increased beyond the legal rate, there is no nsury, but this privilege extends only to premiums, and the association has no authority to increase, by any device or system, the distinct- ively interest charge on the loan, beyond that lixed by statute as the lawful rate. The legislative intention in allowing pre- miums, was to confer on the association an equitable and profitable method of selecting its borrowers, by requirino- of them a bonus. So if the association disregards this intention, and by any form increases the interest, the courts promptly restrain any such practice, and compel it to refund any such over charges. Sec. 4. When Interest is not Usurious. Interest at the lawful rate may be charged on the principal of the loan, without regard to the weekly or monthly reductions/ and because the interest is payable monthly or weekly, does not render it usurious.^ Interest should be on the sum advanced and not upon the par value, where the premium is deducted/ as rower should sign an agreement, it ''Red Bank, etc., Association v- must have been complied with be- Patterson, 12 C. E. Green, 223. fore there can be a recovery : Build- ''Baltimore, etc., Society v. Taylor, ing Association v. Lyons: 2 Kulp. 41 Md. 409; Oak Cottage, etc., Assc* 409. See cicely's Estate, 3 Kulp, ciation v. Eastman, 31 ]\[d. 556; Con- 47- tra : Citizens', etc, Association v. 'Jungkuntz v. Building Associa- 'Webster, 25 Barb. 2C3. tioD, 6 Bull. 428. 'City, etc.. Company v. Fatty, 1 Abb. Ct. App. 847. 1 MAY BE RECOVERED BACK BY BORROWER. 105 it is unlawful to charge interest upon premiums unless per- mitted by statute.' Sec. 5. Illegal Interest not Recoverable by the Association. Mortgagors are only liable for the true amount due on the mortgage, excluding all excessive interest exacted or paid in the shape of bonus or otherwise.' A loan to a per- son not a member, at a premium, in addition to interest, is usurious,^ as the legislative privilege is intended to apply to the members only. A borrower paying legal interest and dues, cannot claim usury, because he did not receive his entire loan, but which was ready for him at all times.* Sec. 6. May be Recovered Back by the Borrovrer. If usurious intei*est is refunded and accepted under an ao-ree- ment that only legal interest shall thereafter be collected, it frees the note from the taint of usury .s Usurious interest paid may be recovered back, not being considered voluntary.* The measure of damages depends upon the statutes of the different states; in some, it would be the difference between the debt, with legal interest added, and the amount of payments made thereon, computed as partial payments on such debt,' Sec. 7. A Personal Defense. Usury is generally con- sidered a personal defense and the purchaser of mortgaged •Hawkeye, etc, Association v. Company v. Whithed, 49 N. W. Blackburn, ^8 Iowa, 385; Oak Cot- Rep. 318. tage, etc , Association v. Eastman, 31 ^Ilammerslough v. Kansas City, Md., 55G; Jackson v. Cassidy, C8 etc., Association, 79 JMo. 80. Tex. 283; Watson V. Aiken, 55 Tex. ^Phillips v. Columbia City, etc., 536 ; Forrest City, etc., Association v. Association, 53 Iowa, 7 1 9. Gallagher, 25 Ohio St. 208. Author- ^Border 8tate, etc , Association v. ized in Pennsylvania; Association V. Hilleary, 68 Md. 53; Williar v. Bal- Neurath, 2 \V. N. C. 95 ; Associa- timore, etc.. Association, 45 Md. tion V. George, 3 lb. 239; Selden v 546; Bexar, etc.. Association v. Rob- Reliable, etc.. Association, 32 P. F. inson, 78 Tex 163; Philanthrophic, Smith, 3 !6. etc., Association v. Mc. Kulght, 35 'Birmingham v. Maryland, etc., Pa. St. 470; Skinner's Ehtate, 4 Association, 45 Md. 541. Phila. 189. 'Mechanics, etc.. Association v. ''Bexar, etc., Asflociation v. Robin- Meriden Company, 24 Conn. 1.^)9; Bon, supra. Joseph, etc., As.'^ociation v. Thomp- fion, 19 Kans. 321 ; Vermont, etc., 106 BUILDING ASSOCIATIONS. property, assuming the mortgasje debt, cannot set it up in an action to foreclose the mortgage.' Sec. 8. Rules for Officers. The officers of the associ- ation sliould be governed in fixing tlie interest charges on loans by the statute. If premium is authorized, there is no question that such authority takes its charge out of the usury statute. If not authorized, the officers should safely confine the interest rates within those allowed by law. 'People's, etc., Bank V. Collins, 27 Bush 110; Henderson, etc., Associ- Conn. 142; Stein v. Indianapolis, at ion v. Johnson, 88 Ky. 101; see» etc.. Association, 18 Ind. 237. als^o Hawkeye, etc. Association v. *In Kentucky, no more than stat- Blackburn, 48 Iowa, 3S5; Burling- utory interest is allowed, and the ton, etc. Association v. Heider, 55 charging of more invalidated the Iowa, 424; Baltimore, etc.. Society contract. Herbert v. Kenton, etc., v. Taylor, 41 Md. 409; Lucas v. Association, 11 Bush. 296; Grodon, Greenville, etc., Association, 22 V. Winchester, etc, Association, 13 Ohio St. 339. I CHAPTER XI. POWER OF THE ASSOCIATION TO BORROW MONEY. Section 1. A Practical Aspect. Section 2. English Authorities. Section 3. Americaa Authori- ties. Section 4. Weight of American Authorities. Section 5. Implied Power to Borrow. Section 6. Overdrawing Bank Account is Borrowing. Section 7. Resolution to Bor- row. Section 8. The Effect of As- signing Mortgages. Section 9. No Power to Sell its Mortgages. Section 1. A Practical Asi>ect. In the course of ita business, an association will often find itself short of monej to supply the demands made upon it. The applications of borrowers exceed the receipts, both temporary and for some time prospective; or a series should be paid off, or some por- tion of the stock has matured and should be cancelled • In the building season, the association Unds itself linan- cially cramped. This stringency may be temporary, as in the winter season, money will naturally accumulate. With these conditions confronting it, should the association borrow money to relieve its embarrassment ? The original idea was, strictly, that of enforced accumulations of members as the source of revenue. Borrowers were not so numerous, and were educated to wait, until the loan fund thus created was sufficient to satisfy each member, in the order of pri- 107 108 BUILDING ASSOCIATIONS. ority. Bat the latter day association, with ns, having an en- larged membership, and fliictnating demands, which are at times beyond its funds, is differently situated. The associa- tion should have money to meet these demands. Very often the member has joined to secure a loan. Some provision must be made to suppress the discontent of disappointed mem- bers. The association is thus threated with a crippling of its membership and diminution of its profits. An association surrounded by these conditions, unless prohibited by statute, may borrow money for the purpose of relieving them. It may be considered as necessary to accomplish the purposes of the association, but this disposition to borrow must not con- flict with the legislative intention in incorporating the associ- ation, and it becomes important to discover tliat intention. The legislature rarely defines that right to borrow, as it is considered incidental to ordinary corporations, and its exercise is left to the control of the courts. But a building association is not an ordinary corporation; in fact, it exercises some ex- traordinary privileges, particularly in not being amenable to the usury laws. It is created for the declared purposes of ac- cumulating money, and lending the accumulations to its mem- bers to build or acquire homes for themselves. The legislature devised this plan of co-operative accumulations for the pur- pose of assisting each member to become his own landlord. The state has a selfish motive in the promotion of a building association, as through its workings, it is planting deeply the roots of citizenship. The drifting, thriftless classes are offered a school of economy, and the earnest and economical classes are given an opportunity. There is, then, a formation of a steady, energetic and accumulating citizen. The cares of the state are lessened by decreasing poverty, and its prosperity is increased by growing material wealth. We may clearly con- ceive, then, that the intention of the legislature in the creation of building associations is, first, to encourage savings; second, to secure homes for the savers. The accomplishment of these objects may be dependent, partly, upon the ability to borrow. Such an assumption is not an undue one, or foreign to the legislative conception of the association. By its silence, the ENGLISH AUTHORITIES. 109 creative power left the association with the limited right to borrow as its legitimate necessities might require. This prop- osition is sustained by the weight of authoi-ity. Sec. 2. English Authorities. In England, the ques- tion was frequently before tlie courts prior to the act of par- liament of 1874, Borrowing to a limited extent was held valid,' but when there was no rule of the association authoriz- ing borrowing, it was held illegal to borrow, and a person who had advanced money to the trustees of a society under such circumstances, was held not to be a creditor, legal or equitable, of the society, and, therefore, not entitled to a winding up order;' and if the rule did not fix a limit of the amount to be borrowed, it was held illeojal.3 So a rule authorizino: unlim- ited borrowing was held ultra vires.* Where the limit was exceeded, and the society derived no benefit from the loan, it was held that it was not liable, but that the directors were personally liable, as they had held out the treasurer as the agent of the society, although there was no fraud on their part.' "Where there was a rule authorizing the borrowing of money for the special purpose of making advances to members who might have applied for them, and tlie society having borrowed a sum of money not actually required, to meet applications at the time of the loan, it was held that the society had no power to take the loan.* And where the rules authorized the trustee to borrow money, and spend it in a way that was held not to be for the legitimate purposes of the society, payment was not allowed to be enforced ag;iinst the society.' Where there was no rule authorizing borrowing, there was no power, but money advanced by a bank which was the depository of the society, 'Laing v. Reed, L. R. 5 Ch. App. 'Chapleo v. Brunswick, etc, So- 4. ciety, L. R , 6 Q B. D., GOG. '/ft re National, etc., Society, ex 'oSIoye v. Sparrow, 22 L. T. Rep. parte, Williamson, L. K., 5Ch. App. N. S., 154. 3u9. '//i re Durham Society, etc., '■'la re Victoria, etc., Society, L. Society, L.R., 12 £q., 610. R. 9 Eq. GOrj. *Jn re Liverpool, etc., Society, 15 5. J., 177. 110 BUILDING ASSOCIATIONS. which went to pay legal liabilities of the society, the claim was allowed. The rules gave the directors power to arrange for advances and their payment,' But where a lender has deeds belonging to some of the members deposited with him, the court refused to compel him to surrender the deeds with- out payment of the money for which they were held as secu- rity." Unless the rule containing the power was certified by the registrar, a person loaning upon the faith of it could not enforce his claim against the society .3 Parliament, in 1874, enacted a statute which expressly empowers a society to borrow under prescribed limits. Under that act, any society may receive deposits or loans at interest within the limits of the section, from the members or other persons, or from corporate bodies, joint stock companies, or from any terminating building society, to be applied to the purposes of the society. In a permanent society, the total amount so received on deposit or loan, and not repaid by the society, shall not at any time exceed two-thirds of the amount for the time being, secured to the society by mortgages from the members. In a terminating society, the total amount so received and not repaid, may either be a sum not exceeding twelve months' subscriptions on the shares for the time being in force. This statute gives the society power -to borrow within the limit fixed* and is evidently the result of experi- ence among English societies, that their purpose can better be accomplished by limited authority to borrow ; and it is a powerful argument in favor of the right of a building association to bor- row. As will be observed by the decisions prior to this act, the courts permitted them under certified rules within a reasonable limit, to borrow, if the provisions of the rules were strictly ob- served, but as statutory authority more fully established the con- fidence of the lender in such securities, the right was incorpo- rated in an express statute, substantially as the courts had been •Liquidator ofthe Blackburn, etc., »Coetmor, etc., Society 51 L. T. Society V. CunlifEe, 52 L. J. Rep. 253. Ch., 92. *Cut if the limits are fixed small- "Wilson's case, L. R., 12 Eq. 521. er, they must be observed : Looker V. Wrigley, L. R., 9 Q. B. D., S97. AMERICAN AUTHORITIES. Ill holding dnring the prior half century. And it has been receutlj held that where a society borrowed money to an extent greater than authorized by statute, which was applied by it as advances to members, who gave the society mortgages to secure repayment of the advances, the persons from whom the society borrowed the money were entitled to follow it into the hands of the members to whom it was advanced, and claim against the mortgages held by the society for the amount secured thereby, notwithstanding the society had deducted premiums from such amounts, when making the advances to the members.* When authorized to borrow, mortgages may be deposited with lenders as security, who, thereupon, are entitled in the winding up, to payment out of the assets, after satisfaction of the outside creditors, and in priority to all claims of mem- bers. But the lenders are to have the benefit equally and paripassu of a first charge upon the general funds and prop- erty.' When the rules authorized borrowing, the lenders are entitled, on the association being wound up, to be lirst paid out of the assets, in priority, to any of the members.' If borrowing is unauthorized, it cannot be upheld on the the ground that the directors mistook the law, but, where the money went to the legitimate purposes, the lenders could recover.* When the society directed the issue of paid up or deposit stock, at a fixed rate of interest, witli tlie right of withdrawing it in preference to all other shares, it was held the stockholders were entitled to be paid before the unadvanced members.' Sec. 3 American Authorities. The principles underlying the English cases are recognized and athrmed in this country. The implied power to borrow, within restric- 'Neath, etc., Society v. Luce.L. R., ^In re Mutual, etc., Society 30 43 Ch. D., 158. Ch. D. 434. •Murray v. Scott, 9 App. Gas. ■'Blackburn, etc.. Society v. 519, overruling Laing v. Reed, Cunliffe, 29 Ch. D., 902; Owen v. L. R., 5 Ch. 8. Roberts, 57 L. T. N. S. 81. 'Murray v. Scott, supra. 112 BUILDING ASSOCIATIONS. tions, has never been denied, except in a case in Ohio/ In that case, the court considers that associations are not affected bj the doctrine that corporations possess the" power to borrow money which may be needed in the transaction of necessary business, but that the money to bo loaned by associations can only be properly accumulated in the manner contemplated by statute, that is, by dues, fines, premium and interest. In other courts it has been held that associations have implied power to borrow money for legitimate purposes.' So that an association, not being prohibited, either by statute or by by-law, from borrowing money, may, on maturity of a series of stock, borrow money to pay the shares of the non-borrow- inc members of such series, instead of accumulating funds to pay off such series.' And the association having the implied power to borrow, has, in the absence of express prohibition, the implied power to assign its mortgages and bonds as secu- rity for the loan.* The association would be estopped by the receipt and application of the money to a legitimate purpose of the corporation, from setting up in an action to recover it, a want of power in the corporation to make the loan. The corporation cannot reap the benetit of the money loaned, and, then allege a want of power to make it.' The directors of the association being, by its by-laws, empowered to manage its affairs, the corporation cannot defeat the recovery of money borrowed, by direction of the directors, on the ground' that the directors applied the money to an unauthorized purpose, unless the lender knew such purpose was unauthorized.' 'State V. Bui'dlng Association, 35 'North Tludson, etc , Association, Ohio St. 2o8. The opinion in this v. First National Bank, 47 N. W. R. case is not founded upon reasoning (Wis) 300. or authority, and absolutely ignores *Ib. But an assignment of mort- the English cases. It is not entitled gages after proceedings to wind up to much weight as an authority. is void as against the receiver ; Hin- »Davi3 V. West Saratoga, etc man v. Ryan, 3 C C. (Ohio) 529. Union, 32 Md. 285 ; Jones v. Build- 'lb; Jones v. Buildina; Associa- ing Association, 94 Pa. St, 215 ; Jack- tion, supra; Loan Company v. Con- 8on v. Myers, 43 Md. 452; MuLh v. over. 5 Phila. 18. Dolfield, 43 Md. 466. *North Hudson, etc., Association Y. First National Bank, supra. IMPLIED POWER TO BORROWER. 113 It was held in Pennsylvania that when the association is authorized by its charter to receive money on deposit from it8 stockholders, to bear interest, in case of insolvency, such stock- holders are creditors as to their deposits, and are entitled to ehare pro rata with other outside creditors in preference to stockholders. This was also held to be true when money has been received from persons who were not stockholders, though the association had no authority to so receive the money.* In another case it was held that a solvent buildinf^ associa- tion may assign a mortgage in payment of, or as collateral for, a debt; and in an action on a mortgage assigned as collateral, for the payment of an order given to a member on his with- drawal, it is unnecessary to determine whether the consent of the directors to such assignment is legal under the statute, pro- viding that at no time shall one-half of the funds in the treas- ury be applicable to the demands of withdrawing members without the consent of the directors.* Sec. 4. Weight of American Authority. The unquestioned weight of authority in America, is to give build- ing associations the incidental right to borrow. The question of the right to borrow is to be determined by enquiring into its objects and purposes. It has conferred upon it those inci- dental rights that are consistent and reasonably necessary to carry on its business. The vital question is: Is borrowing necessary to accomplish its objects? If it is, then upon prin- ciple and authority, it may borrow. Sec. 5. Implied Power to BorroTT. The current of English decisions, prior to the act of 1874, is that it has a restricted right. The American cases, excepting the Ohio case, draw the same conclusions. Those courts consider the borrowing power necessary from the nature of its business, and hold it granted by implication of law. It may be necessary to protect its interests as a junior lien holder, or to satisfy the demands of borrowers. If the association is unable to supply borrowers from its regular fund, a temporary loan wiU satisfy 'Criswell's Appeal, 100 Pa. St. » Queiu vs. Smith, 108 Pa. St. 325. 488. 8 114 BUILDING ASSOCIATIONS. the members, and when idle money accumulates, the associa- tion can pay its debt. Borrowing is only intended as an expedient. To become a permanent borrower, is not a part of the corporate plan of an association and is not contemplated by the decisions investing the power to borrow in the associa- tion. Under proper limitation, it is sanctioned by the courts. That limitation is, that the money is to be ap])Iied to an authorized purpose, yet under the decisions, the association cannot escape its obligation to repay, because it applied the money to an unauthorized purpose, unless it can show that the lender had knowledge of this. The rights of the association to borrow is thus settled upon authority, and it rests further upon sound reasoning. It rests upon the doctrine of implied power, and there is no substantial variance between the appli- cation by the courts of that doctrine to building associations and other corporations. Sec. 6. Overdrawing' Bank Acconnt is Borrow- ing. Prior to the act of Parliament of 1S74, the English courts were disposed to indulge associations in overdrawing their bank accounts, by consent of the bank, without applying the rule of borrowing as limited by the courts, so they uniformly held that overdrawing is not borrowing.' This distinction is hardly maintainable. The association thus uses money of the bank and pays interest upon it. The relation of creditor and debtor arises and it is difficut to conceive why overdrawing would be legal, if borrowing is illegal. The truth is, if borrowing is unauthorized, such overdrawing is a mere device and is ultra vires and cannot be enforced.' So held in a recent English case, but the bank permitted the bank to hold deeds as security for money advanced to pay proper debts of the societj^ pre- sumably on the ground that the society could not dispute its right to make a contract from which it had reaped ben- efits.' ' In re German Mining Company, Blackburn, etc.. Society, v. Cunlifie, 23, L. J. Ch., 956. In re Cein Cil- 52 L J. Hep. Ch 93 cen, etc, Company, i38 L. J. Ch. 78; * Brooks v. Bhickbiirn, etc., So- Waterlow v. Sburp, L. R, 8 Eq. ciety, L. R., 9 App. Ch.s., 857. 501, doubted in Liquidators of * lb. THE EFFECT OF ASSIGNING MORTGAGES. 115 Seo. 7. Resolution to Borrow. In making loans by the association, the directors of course are to be governed bj the creative statute. If there is no prohibition upon borrow- ing, the directors may borrow for the legitimate purposes of the association. If the by-laws or rules make no provision for borrowing, the directors at a legal meeting, with a quorum present, should pass a resolution authorizing the loan. That resolution may read as follows: "Whereas the Association is in need of money to . . state object of borrowing — therefore; Be it resolved, that the President and Secretary of this association are authorized and empowered to borrow the sum of $. . . . for .... at the rate of — per cent, per annum, and to deposit with the lender, bonds and mortgages of the association, as collateral security for such loan." Sec. 8. The Effect of Assigning Mortgages. As heretofore cited, the decisions both in this country and Ensr- land, authorize the assignment of mortgages as collateral security for the re^^ayment of a loan, or even to secure a with- drawing member, who, by that act, has become a creditor. Such assignments extend only to the association's interest in the security. No right of the mortgagor can thereby be affected. The security, as any other security, is not available so long as the mortgagor complies with his contract. As he complies with his contract, by paying his weekly dues, he is decreasing the association's interest in the mortgage and consequently, diminishing the security. If the mortgagor thus continues in compliance with his contract and the association still owes the debt, it will have to supply other mortgages as collateral, in which its interest is large enough to be sufficient for pur- poses of security. And so, if the moitgagors in the collaterals carried out their agreements, the association is bound to mature their stock, but if their loan still remains unpaid, the payment and cancellation of the stock cannot take place until their debts are paid to the association. The mortgagors may however, pay those debts by their matured stock. They have the right to apply their matured stock in full satisfaction of their mortgage debts. Wiiil© the loan in that event has lost 116 BUILDING ASSOCIATIONS. its specific security bj these continued weekly mutations and the maturity of the stock, yet the assets which have come out of the mortgage into the general fund for distribution, are sub- ject to the lien of the debt, and must satisfy it before cancella- tion of the members' stock can take place. Thus, it is readily seen that the assignee of a building asso- ciation mortgage can only claim the society's interest, which in in the process of time may be reduced to nothing. To make such mortgages available as collateral security, the association must replace those when its interest has become extinguished, by others where its interest is sufficient for the purposes intended. Sec. 9 No Power to Sell its Mortgages. The con- tract of the mortgagor being in a sense personal, and not to be defeated by any assignment by the association, it would be beyond the power of the association to sell absolutely his morto-ao-e. So Ions as the association has an asset in the morto-age, it may assign it as collateral, so long as it does not conflict with its corporate objects, but it cannot infringe upon the rio-lits of the mortgagor, and if the association undertakes to absolve itself from the contract and not only part with its interest in the mortgage, but transfer rights therein in favor of the mortgagor, and against itself, it is doing a wrong for which the injured member may obtain redress against the asso- ciation, in whatever amount he has been damaged by the action of the association, in placing beyond its power its ability to keep its contract with him. The courts uphold an assign- ment as collateral security, upon the theory that it is only the association's interest in the mortgage that is affected. The assignee can in no way interfere with the mortgagor's interest. So that if the mortgagor defaults, he is entitled to credit the value of his stock and if he does not default he is entitled to continue his payments and cancel his mortgage,' disregarding the assignment, for he has extinguished the association's inter- est in the mortgage. The assignee's lien as against the mort- ' Barton v Enterprise, etc., Asso- ciation, 114 Ind. 226. NO POWER TO SELL ITS MORTGAGES. 117 gage is eo instanti extinguished, but it then attaches to other corporate assets. In selling outright his mortgage, the association undertakes not only to sell its own interest, but to transfer the rights of the mortgagor. It is plain, upon principle, that it cannot do this without his consent. And, as the association is a mutual affair, it becomes a question whether or not such a sale would not require the unanimous consent of the shareholders, as all are interested in auj tiual disposition of its assets, or anj part of them. CHAPTER XII. DISSOLUTIOJ^ AND SETTLEMENT. Section 1. Dissolution when all stock is matured. Section 2. Other methods of dis- solution. Section 3. What acts will not dissolve. Section 4. Dissolution hj unan- imous agreement. Section 5. Effect of appoint- ment of a receiver. Section 6. Final settlement with members and creditors. Section 7. Settlement before maturity. Section 8. Assignment for credi- tors. Section 9. Appointment of re- ceiver and winding up. Section 10. Marshalling of as- sets. Section 11. Liability of stock- holders. Section 12. Liability of bor- rower for debts. Section 13. No liability for losses under the mortgage. Section 14. Liability of with- drawing member. Section 15. Assets to be distri- buted among borrowers and non- borrowers alike. Section 16. Consolidation of as- sociations. Section 1. Dissolution When all Stock is Ma- tured. When the association has matured all of its slock, it then dissolves. The old terminating society, with its one series, entered voluntary dissolution when it had paid oS the series. Under the present systems, the serial and the permanent, there is no dissolution by the maturing of a series or part of stock. The association is constantly receiving a new infusion of blood and continues its corporate existence by reason thereof. But 118 DISSOLUTION BY UNANIMOUS AGREEMENT. 119 the dissolution of the association may take place from otlier causes. Sec. 2. Other 3Tetliocls of Dissolution. The disso- lution of a corporation mav be brought about bj reason of (a) the forfeiture of its franchises bj the adjudication of a court, (b) tbe loss of its charter by a charter provision to the effect in case the corporation fails to do certain things within a certain time, (c), the repeal of its charter under the reserved power of the state, (d) the voluntary surrender of the franchises by the stockholders, or (e) the expiration of the time limited for its existence in the charter.' Sec. 3. What Acts will not Dissolve. Except when the charter is lost by reason of the second provision, the corporation does not dissolve of itself. For instance, neglect to elect officers while the capacity remains in the members to elect, will not dissolve it,' nor by a cessation of all corpo- rate acts and business,' nor by mere nonuser of its franchise, nor by insolvency,^ nor by death of its stockholders.* Only the state by its proper officer can sue to forfeit the charter, and whenever it misuses its powers, the state has this right. A stockliolder cannot maintain the suit.'' Sec. 4. Dissolution by Unanimous Agreement. The- stockholders may, by unanimous agreement, wind up the association before the time prescribed by statute, and such agreement is binding, not only on the member, but on the assignee of such member,* but an agreement to suspend opera- tions and close up the affairs of the company is not in any fair » Cook Stock, etc., sec. 63S. » North v. State, 107 Ind. 356. •Commonwealth V. Cullen, 13 ' Building Association vs. Kelley, Pa. St. 18; St. Loui«, etc, Association 1 Kulp, 9. A majority cannot force V. Augustin, 2 Mo. App. 123. the rest against their will to wind up * Kansas City, etc., Company v. before the time of maturity. So Sauer, 65 Mo , 279. held in a case where borrowers tried * Folger v. Columbian, etc., Com- to compel non-borrowers to accept pany., 9(5 Am. Dec. 757, note. a sum per share less than the * Valley Bank, etc. Institution v. amount fixed by charter; Pf ;ifi v. Sewing Society, 28 Kan. 423. Building Association, 6 W. N. O. * Bo>ton, etc.. Company v. Lang- 349. don, 24 Pick. 49. 120 BUIi^DING ASSOCIATIONS. sense, either a present forfeiting or laying down of the franchises or corporate rights of the association.* If the members unani- mously agree to cease business before maturity of the stock, the assets should be reduced to a distributive basis. The non- borrowing members should pay their dues to the date of dis- solution as should the borrowing members, while the latter should repay their loans, less the surrender value of their stock, if they choose to so apply it.* Unless there has been an intention to dissolve the corporation, accompanied by the sur- render of the charter, the association will not by this distribu- tion of assets, be considered defunct so far as its chartered existence is concerned. Sometimes, the association in times of depression or misfortune, may determine to suspend until its condition is determined, and this the members may do; but a borrower is not thereby relieved from the payment of inter- est on the loan during the suspension.^ Sec. 5. Eifect of Appointment of a Receiver. However, when the association goes into the hands of a receiver, the borrower is not chargeable with weekly dues and interest, for this is equivalent to a dissolution as to him"* The appointment of a receiver to wind up the associa- tion and distribute its assets, operates as a discontinuance of ' City Loan etc. Association v. ment made by the mortL'^agor, ac- Goodrich, 48 Ga. 445. cording to the rule applicable to s The following holding as to an account between debtor and computation was made in a Mary- creditor; Hempstead, etc., v. King, land case: 58 Md. 271). When the affairs of a building "Thomson v. Ocmulgee, etc., As- association are in course of liquida- sociation, 50 Ga. 350. tion the original purposes having ^Peter's etc Association v Jaecksch, been abandoned by mutual consent 51 Md., 108; Bowker v. Mill River the proper mode of stating an ac etc., Association, 7 Allen, 100; Cook count between such association and "^^ Kent 105 Mass., 24^^ ; In Hinman a shareholder who has obtained ad- v. Kyan 3 C. C (Ohio) 529, it was held vance on his shares of stock, on a that while the dues stop, the mort- mort„»«\ ^^^ or,„,Tm Aa per V. German, etc. Association, 23 cent, (the legal rate) per annum, ae- ' ' ducting from time to time, the pay- Kans. 549. FINAL SETTLEMENT WITH MEMBERS. 121 all future payments; or, if the association be notactnally dis- solved, if there can be no chance of paying the unredeemed 8hares their par value, and the association be unable to carry out its contract with the mortgagor, so as to enable him to get a release of the mortgage, according to the terms of its cove- nants, then tlie contract as originally contemplated is termi- nated, and the mortgagor occupies the same position as if the association were dissolved' Sec. G. Final Settlement with Members and Creditors. Final division and distribution of the assets of the association are required to be made when the accumulated fund is sufficient to pay the par value of the shares after the payment of all debts and liabilities of the association.' The shareholders must wait until the debts and liabilities are dis- charged before taking the assets. Any agreement for a con- trary arrangement will be held void by the courts as to credi- tors.3 Unless the association has distributed all pf its assets and matured all of its stock, there is no dissolution of the corporation, merely a termination of the membership of those holding cancelled and retired stock. In the old societies issuing but one series, or all of their stock at one time, there was no settlement with the members until dissolution, but under the plan of associations as existing in the United States, they issue stock in series, one after the other, or as it is applied for, so that the effect is to continue the existence of the association. Whenever the payments on stock, together with its pro rata share of profits above debts, equal its face, the association is bound to retire it, and thereupon the association sets to work to retire the next issue and so on. If the stock is issued in classes or series, the entire series is retired; if it is issued at different times, as in the permanent, each issue is retired separately. In the former, the profits are credited to each series on the books of the association, as it may be entitled to them, and in the latter, the profits are credited each divi- 'Hampstead, etc., Association v. 'White v. Mechanics etc., Associa- King, 5» Md. 279 ; Windsor v. Ban- tion, 22 Grat. 26d. del, 40 Md. 17'3 ; Low Street, etc., 'ileg,s;ie v. Building Association, Association, v. Zucker, 4S Md. 448. 107 N. C 581. 122 BUILDING ASSOCIATIONS. dend day, on the member's stock, in his pass book. "When the maturity is reached in the serial, it is determined by a division of the profits, attaching to that series, by the total number of shares in the series, and in the permanent, it determines itself by adding together the payments and credited dividends. If in its computation, the association made an error in extin- guishing stock, the shareholder may maintain a bill in equity to correct the error,' or, if the association made a settlement contrary to its constitution, by which a stockholder received more than bis share, he may be made a party to a bill in equity, for the purpose of having all questions arising in the transaction adjudicated, one of which is their liability to refund such excessive amount,' and though such settlement is in good faith, the overpaid members will not be released, where it turns out that there will be a deficiency as to non-retiring members.* In assuming a basis for the distribution of its earnings, the association should not regard so much the time of its issue of stock, or its series, as the amount of dues received on the stock.* The association has been able to realize a profit on account of money paid into its treasury by the members, and the profits thereon justly attach to those paying. If a member is delin- quent in his payments for a short period, and the association is compensated for such delinquency by the fines, the mem- ber's share of profits should attach notwithstanding, but if the default is long, without any prospect of removal, the association should in its by-laws provide for some disposition of such stock. It may be by forfeiting it after a long continued default, but the more equitable method is to retire it, and after deducting the proper charges, place it at the member's disposal in the treasury. The association has been, in this way, pro- tected and receives the use of the money. Sec. 7. Settlement Before Maturity. The mem- bers may agree unanimously to wind up the association, before maturity of the stock, and any fair and equitable agreement 'Building Association's Appeal, ^jyicj^pown v. Building Associa- 33 P L. J. 324. tion, 5 Bull. 52. 'Goodrich v. City, etc., Associa- ^Seibel v. Building Association, tion, 54 Ga., 98. 43 Ohio St., 371. APPOINTMENT OF RECEIVER. 123 made between tlieiii, as to the mode of settlement and dissolu- tion, will be upheld. Thus, an agreement to wind up an asso- ciation by paying the owners of the unredeemed shares the sums they had advanced, with interest, and that the owners of the redeemed shares who had given mortgages for the price of the redemption, should be discharged upon paying the amount of their mortgages with interest, was held valid and enforce- able" In order to make any such agreement valid, there are two cardinal points to be observed, to-wit: The discharge of all of the society's debts and, the equal distribution of all the remaining profits among the stockholders, according to their stock- holdings. Sec. 8. Assig^iiment for Creditors. When a build- ing association has become insolvent, it has been held in Pennsylvania, it may make an assignment for the benetit of its general creditors," but not for the benefit of its members,* but if an assignment has been made for general creditors, the treasurer of the association is entitled to be reimbursed as a general creditor, for moneys paid by him on orders drawn before the assignment, in priority to the claim of withdrawing stockholders.* The fact, that an association has made an assignment for the benetit of creditors does not prevent the recovery of a judgment against it.s The usual method is for a receiver to be appointed for an insolvent association, and the rights of creditors and members are protected and adjusted through the receivership. Sec. 9. Appointment of Receiver and Winding- up, In regard to the appointment of a receiver, it is under the control of the statutes of the state, and, to some extent, within the discretion of the court, considering the application for the receiver. Insolvency of an association is seldom, and so rarely do the assets shrink, so that creditors are unable to 'Hoboken, etc.. Association v. 'lb. Martin, 2 Beas., 428. *Christ5an'sAppea1,102Pa.St..l84. '/« re Estate National, etc., Asso- 'Connolly v. Building Association, ciation, 9 W. N. C, 79. 6 W. N. C HtJ. 124 BUILDING ASSOCIATIONS. enforce their claims without a receiver, that the courts have not often been called upon to exercise that authority. A member, when he believes the assets are sufficient to dis- charge the stock, may invoke the aid of a court of equity to compel a settlement, if it is established one should be made. But in order to have the right of such aid, the petitioner must be a full member and not a creditor.' Sec. 10. Marshalling' of Assets. When there is in- solvency and dissolution, the adjustment of the rights of bor- rowers, non-borrowers and creditors, becomes a question of nicety and importance. Equity must be done to all,' and this is true, no matter what preferences as to payment are made by the charter and by laws among different classes of stockhold- ers.* If the parties unanimously agree upon an equitable set- tlement upon dissolution, it will be upheld in a court of equity.* The rights of the different classes will be considered in the invene order as stated. The creditors, whether lien holders or general, are entitled to be first paid in full, before any distribution is made to the stockholders. And, while payments on stock are not consid- ered, ipso facto, payments on mortgages, to such an extent that any one except the parties can make such application of them yet the rule is varied, so a junior mortgagee may, in equity compel the association, as holder of the lirst mortgage, to resort first to stock held by it as collateral security, before enforcing the mortgage lien,' and the association must sell the stock or retire it, in either case crediting the proceeds or value on the debt. The association h.as the right to sell or apply this stock on the mortgage debt, as against any subsequent purchaser of 'Lister v. Log Cabin, etc., Asso- 'Criswell's Appeal, 100 Pa. St. ciation, 38 Md. 115; Edelin v. Pas- 488. coe, 2i Grat. 826. 'Goodrich v. City, etc., Associa- '^Bowker v. Mill River, etc.. As- tion, 54 Ga. 98. Bociation, 7 Allen, 100. ^Herbert v. Mechanics, etc., As- 'Strohen v. Association, 115 Pa. sociation, 2 C. E. Gr. 497. St. 273. APPOINTMENT OF RECEIVER. 125 the stock. He takes it subject to the lien and cannot prevent its enforcement.' Giving the junior mortgagee the right to compel the asso- ciation, as a first mortgagee, to resort to collateral security, in the shape of stock, before reaching the land held as common security, is but an expression of the equity rule, that if one party has a lien on, or interest in, two funds for a debt, and another party has a lien on, or interest in one only, of the funds, for another debt, the latter has the right, in equity, to compel the former to exhaust the other fund in the first instance for satisfaction, if that course is necessary, for the satisfaction of the claims of both parties, whenever it will not trench upon the rights, or operate to the prejudice of the party entitled to the double fund.' "While this right of the junior mortgagee would more often be called into exercise in foreclosure proceedings, it is likely in any settlement of the corporate affairs where the security is of questionable sufficiency for all liens. In the event of the application of stock payments, under such circumstances, to the mortgage debt, the simplest manner is for the association to give the borrower credit on his debt to the amount of the withdrawal value of his stock. But the right to require application of stock does not extend to a iudg- 'Weiss's Appeal, 5 W. N. C. (Pa.) able, etc.. Association, 33 P. F. 423 It would seem upon principle Smith 830; Kremer v. Springfield, that when the mortgagor sold his etc.. Association, 6 W.N. C. 267; stock as against him, the assignee Association v. Wall, 7 Phil a. 240; could compel the association to first Kingsessing, etc., Association v restart to the mortgage before re- Roan, 9 W. N. C. 15; North Ameri- sorting to the stock. ca, etc , Association v. Sutton, 35 Pa. 'Redbank, etc.. Association V.Pat- St. 4G3; Spring Garden, etc., Asso- terson, 12 C E. Gr. 223; Washing- elation v. Tradesmen's, etc., Associa- ton, eic, Association v. Beaghen, 13 tion, 46 Pa. St. 493; Link v. Ger- C E. Gr. 98. Contra: Economy, mantown, etc., Association, 89 Pa. etc., Associaticm v. Hungerbuehler, St. 15. The Pennsylvania cases are 93 Pa. St. 258 ; Springville, etc., As- out of harmony with other courts Bociation v. Raber, 33 Leg. Int. and conflict with, principles of 329; Building Association v. Eshel- equity, bach, 7 Phila. 189 ; Selden v. Keli- 126 BUILDING ASSOCIATIONS. ment creditor.' "WTien the rights of a second mortgagee and the assignee of stock must be adjusted, the doctrine of mar- shalling assets applies, and the repayments by the mortgagor to the society must be apportioned ratably between the mort- gaged property and the stock.' But the doctrine will not be applied in any case where third parties, over whom the person seeking benefit of the doctrine has no superior equity, will be injured.* Any subsequent incumbrancer to compel the asso- ciation to make the application of stock payments, must notify it of his claim,* and, unless so notified, the association will not, by releasing one of its funds, prejudice its right as to the other.' The recording of a subsequent encumbrance, is not notice," but where there was actual notice of a subsequent morto-asre, and the association released stock held as collateral security, its mortgage was deemed satisfied to the extent of the stock as against the second mortgage.^ In the event of insolvency, or dissolution of the association, the creditors must be paid in full, or the assets exhausted,' before the rights of the members to participate can be exer- cised. 'Herbert v. Mechanic's, etc., As- Bociation, 2 C. E. Gr. 497. »Moxon V. Berkeley, etc., Society 59 L. J. Ch. 524. 'Reilly v. Mayer, 1 Beas. (N. J.) 55. *Uniontown, etc., Association's Ap- peal, 92 Pa., St. 200. »Quakertown, etc., Association v. Sorver, 33 Leg. Int. (Pa), 359; Patty V. Pease, 8 Paige, 277 ; Stnyvesant v. Hone, ISandf. (N.Y.),419; Cheese- brough V. Millard, 1 Johns Ch. 409. «Ib. ' "Washington, etc Association v. Beaghen, 12 C. E. Gr. 98. * Mortgages of advanced mem- bers, it has been held, cannot be treated as assets for the purpose of paying the liabilities of the associa- tion. The revenue from them is an available asset. This revenue, with other revenues of the association, creates the assets, the common fund which is used to pay off the stock of all shareholders: Lister v. Log Cabin, etc.. Association, 38 Md. 115. It seems to the writer that, in a sense, a mortgage to the extent of the amount due thereon is an asset. It represents a part of the accumu- lations of the society, in fact it is a loan and subsisting debt in the society's favor. Until application is made of stock payments, it is a debt for the full amount. It is not an available asset however, so long as the mortgage contract is in force. In case of insolvency, the amount due on the mortgage is available as a paying or distributing asset. LIABILITY OF BORROWER FOR DEBTS. 127 Sec. 11. Liiability of Stockholders. If the assets do not pay out the debts to outsiders, the etockholders must respond to the extent of the deficiency, and the limit of their iability is the amount of their stockholding. Building asso- ciation stock, just as stock in any other corporation, must be paid for, and the distinguishing difference between it and other corporations, is the manner of payment. The building association undertakes to make a profit by use of its accumu- lations, to be applied in reduction of the inember's subscrip- tion. It requires partial payments up to the period when these profits upon a pro rata division among the membera will make the stock worth face. The stock is then paid for. If it contracts debts in excess of the earnings and stock pay- ments, the receiver, just as in ordinary corporations, would bo entitled to enforce 2^ prorata assessment against each member to cover the debt. The assessment, so long as it did not exceed the amount of the association's assets, would only have the effect of postponing so long the maturity of the stock, but if it exceeded the assets, then each member would be liable to an assessment, not exceeding an amount equal to the difference between his dues paid in and the amount of stock held by him. In distributing the assets or in assessing liabilities, there is no distinction between investor and borrower, so far as their stock is concerned. "Whatever profits accrue to the investor's stock, attach in the same proportion to. the borrower's stock. If the society dissolves before maturity, the investor is relieved from further payments and this is true of the borrower. The association has placed itself beyond the power of perform- ing its part of the contract, and the courts will not require either class of shareliolders to longer perform their agree- ments. Sec. 12. IJability of Borrower for Debts. But this does not release the borrower from the payment of his debt The association settles with theinvestor by paying him the value of his stock; it settles with the borrower by collecting the amount of the loan, less the value of his stock. In the event] of loss, the borrower must bear his proportion with the in- 128 BUILDING ASSOCIATIONS. vestor.' This is the rule established by the American cases, bat in Eiiirland, it is held the borrower cannot be held to that iia- bility/ unless the rules imposed it.* Sec. 13. No Liabilities for Losses under the 3Iortg'age. The liability against the borrower for losses, a& has been stated, is a personal one, just as that of the investor is, and cannot be enforced against the mortgaged property, unless the mortgage clearly includes it. So, that when the mortgagor has paid off his mortgage, he is entitled to have it released, although he may be liable for debts of the associa- tion. His personal liability continues. That is a matter aris- ing out of his stock transaction and an entirely separate con- tract. Sec. 14. Liability of Withdrawing Member. When a member gives notice of withdrawal, his membership ceases and he is creditor of the association, so that he cannot be held to losses from bad investments made after he with- drew.* But if any shareholder has been illegally released, as by receiving an amount which should have been subject to a loss, his liability can be enforced in a proceeding to wind up, by making him a party.* ' Hinmin v. Ryan, 3 0. C (Ohio) 529; Edelinv. Pascoe, 23 Grat. 8i(3; Windsor v. Bandel, 40 Md. 173; Stroliea v. Franklin, etc, Associa- tion, 115 Pa. St. 273; Laurel Run, etc. Association v. Sperrins;, 106 Pa. St. 334; Booz's Appeal, 16 W. N. C. 865; People v. Lowe, 117 N. Y. 175 reversing 47 Hun, 577. In the 117 N. Y. case, it was held that each member for each share held by him was entitled to the same amount, i. e., a proportionate share of the assets, if a debtor, and if he owed more than his distributive share, he was bound to pay the balance and upon such payment was entitled to a di.-^charge of his mortgage; see also, Everman V. Schmitt,"24 Bull. (Ohio) 50; i\Ic- Grath v. Hamilton, etc.. Association, 44 Pa. St. 883 ; Knobiauck v. Robert Blum, etc, Association, 25 Pitts L. J. O. S. 39; Wittman v. Building Association, 7W. N.C. 8U;'Seibel v. Building Association, 43 Ohio St. 371. ' Buckle V. Lordonny, 56 L. J. Ch. 437 ; Brownlie v. Russell, L R., 8 App. Cas. 235 ; Tosh v.North British, etc., Society L. R., 11 App Cas 489. ' Rosenberg vs. Northumber- land, etc.. Society, LR., 22 Q B.373, But see the case of In re "West Rid- ing society, L. R , 43 Ch. Div. 407, where it was held that borrowers and non-borrowers must contribute equally to losses. * Christian's Appeal, 102 Pa. St. 184. « Cason vs. Seldner, 77 Va. 293. CONSOLIDATION OF ASSOCIATIONS. 129 Sec. 15. Assets to be Distributed Amoiij? Bor- rowers and Non -Borrowers Alike. After the credi- tors are satisfied, or if there be none, and the payment of all expenses, the method of distribution of the assets of an asso- ciation, solvent or insolvent, is to pro rate them among the shareliolders, borrowers and non-borrowers alike. If the asso- ciation is insolvent and the winding up is voluntary or invol- untary, 80 that the distribution will not mature the stock and discharge the mortgages, the payment of the difference may be enforced ao^ainst the morto:a"ors and the sum thus realized passes to the common fund for like distribution. Confusion will be avoided in these matters, by holding fast to the fact that the borrowing has no effect on the membership of the borrower, and its only effect upon his stock, is to subject it to a collateral lien. The debt remains in law undiminished, although the stock may have reached maturity, and then the member of the association has the privilege of applying it in satisfaction of the debt. Until such application is made, it remains in full force, unaffected, except by the lien, and it is subject to all liabilities and rights accorded any other stock. Sec. 16. Consolidation of Associations. It some- times happens, in the management of associations, that by union of their interests, two associations can accomplish more than either can do singly. But how to unite their interests when it is wise, is a question of some difficulty. Without legislative authority, they have no power to consolidate, and if they had such power, the actual union would be full of unadjustable points. The clearest way is for the stockholders of one association to unanimously agree to dissolve. This right is vested in them.' The manner of dissolving should be by agreement to that effect signed by each stockholder, and a resolution duly entered on the minutes record of the associa- tion reciting that as it is the expression and consent of each stockholder that the corporation dissolve, such action be taken, and that the value of the assets of the association be ascer- 'Barton v. Enterprise, etc., Asso- ciation. lU Ind., 220. 130 BUILDING ASSOCIATIONS tained, and a pro rata distribution thereof liad. If there are borrowers, their debts should be repaid and such repayment should go into the common fund. The assets realized from the various sources are then divided up among all the mem- bers J9r6> r<2to, and the society is dissolved. This is the way it is done theoretically, but in case of practical amalgamation, the surviving society receives the applications of the borrowing members of the other society, for loans in amount as held by them in such society, and if the security and titles are satis- factory, the surviving society grants loans upon the properties in the full amount as theretofore held, and then ascertains the value of the stock of such society, and issues stock to all the members of the old society, according to their old holdings, entering credits on their passbooks as entered by the old society, and the stockholders become members of the surviving association. The absorption is then complete. A serial may be changed into a permanent, or vice versa, by the unanimous action of the stockholders. If a serial is changed to a perma- nent, the only changes to be made would be to issue stock at any time, instead of in classes, and then to credit upon the pass books the profits of the entire preceding time, or in other words, divide the profits after all proper deductions as expen- ses, the amount carried to the reserve fund and other charges. Thereafter, the profits are divided up every six months and stock is issued at any time. These are the two important distinguishing characteristics of the permanent. It virtually makes a division of profits every six months, or annually, instead of at the maturity of the stock as with the serial. If the change is from the permanent to the serial, the profits credited as dividends are withdrawn from the division and lumped in the treasury, to be held until they aggregate suffi- cient to pay off the stock. The difficulty in this part of the change would be to throw the separate issues of stock into different classes. It could only be done if some of the issues were near enough to each other to form classes. It would not matter as to the size of the classes, as such division is only for convenience of issuing stock, and does not create an indepen- dent and distinct part of the association. It is a part of the > CONSOLIDATION OF ASSOCIATIONS. 131 association entitled to its share of the entire profit. If the shares issued in the permanent can be so classified, the change is then easily effected as indicated. If permitted by statute, the association, upon paying off stock, may provide for reissuing the same as new stock. Thus, when a share is paid off, a new certificate therefor may be issued to a new member, upon his entrance into the asso- ciation- CHAPTER Xm. PRACTICAL EESULTS. Sfctton 1. The character of a Section?. Method of loans, building association. Sections. Some results. Section 1. The Character of a Building Associa- tion. Having considered the building association in various phases, it remains to look at its results. The simplicitj and comparative certainty of the scheme, inspire contidence, and its successful growth and substantial achievements have enlisted a very strong support. The scheme is simple, as a proposition, to receive and loan money for the common profit of all members, and to return the receipts with the accumulations, to the members, whenever they reach a certain amount. The principle of co-operation has but received another application. The only element of uncertain- ty in its business is in its securities. Unless they are depressed by unforeseen causes, so as to impair them, or render them worthless, the association can foretell with almost mathe- matical accuracy what it can do. And whatever would affect its securities, consisting of real estate, would, unless it were some local trouble, disturb directly or indirectly all securities. The assets of the association are in the hands of the earning classes of the land, the wageworkers, who are contributing daily to the substantial and material wealth of the country. There is no element of speculation or hazard to be considered, as in most large moneyed interests. The successful mastery of those elements have built up large financial institutions, but talents 132 METHOD OF LOANS. 133 of that character find no field in the operations of building associations. So simply, and yet so certainly, are they con- structed, that they almost carry themselves. They do not deal with men whose financial security is their personal responsi- bility, which may be lost in a day. Whatever financial disa- ster closes the factories, shops and stores, and stops the rail- roads, threatens the future usefulness of the associations, but not their solvency, so long as real estate is not greatly depressed. But when this result is reached, larger but less stable securities have been impaired before the building asso- ciation has been reached. Besides the ordinary security, the association has bound its borrower by the strong tie of home interests. A member will give his best energies to save his home. It is the instinct of self preservation. All hie capital outside of his home may be involved, his note in bank may be protested and he philosophically regards these things as culminations of misfortunes, but he does not look so calmly upon the creditor of his home. The building association mortgage, resting upon it, is protected, if possible. With the home maker, all energies bend to its payment. Thus, it be- comes apparent why the building association is prosperous and secure. Sec. 2. Method of Loans. It loans its money upon first mortgage on real estate. In addition, it requires the bor- rower to be a member, to take an active interest and hold stock. It pledges the stock as additional security and appeals to his sense of accumulation by offering him a share of the profits. The borrower, in addition to interest, pays a premium, which generally increases the interest at least two or three per cent. This would seem oppressive, were it not for the fact that he shares in all the profits, which, when applied on the debt, decrease the interest. The source of the great profit to asso- ciations, by which they are enabled to show great earnings, compared with other money lenders, is the weekly repay- ments. A borrower pays in a certain amount each week or month, as the case may be, on his stock, which is pledged. These amounts are reloaned at once and are being repaid in the same 134 BUILDING ASSOCIATIONS. manner, and so on, that one dollar loaned to A, is partlj repaid and reloaned to B, who repays part of it, which is loaned to 0, and each loan is earning for the full amount, as no credit is made upon repayment to stop interest. A as a bor- rower has, in fact, repaid part of his debt, and the society has reloaned it to B for the benefit of A and the other members. Thus, money by this method, assumes a manifold earning capacity, attainable nowhere else. The burden on the bor- rower is not heavy, for while he is paying interest on his full debt and making repayments, those repayments are earning a good profit and his accumulations, secured in this way, are mak- ing a sure sinking fund to discharge his debt. The security of the association is thus weekly being increased. The debt is growing gradually smaller by the weekly repayments. The borrower has obligated himself to make them or the whole debt becomes due and collectible. He understands this, and that by his payments he is substituting for a rent cost, on most favorable terms to himself. The money paid in as dues, as it accumulates to a size large enough, is at once loaned. The experience of associa- tions is an inability to supply the demand. The home-getters are not limited to any particular business or locality, so the field of building associations is, almost, as wide as humanity itself. So long as other businesses thrive, this institution's operations are practically unlimited. Several methods have been tried in loaning money, but there are three generally recognized systems. Nearly all associa- tions charge a premium in addition to interest. In some, the premium charge is deducted from the face of the loan and interest is charged on the full amount. Suppose the shares are $200 each and the member owns five shares. He desires to borrow $1,000, and his bid is 25 per cent. The association pays to him $750 and charges him interest on $1,000, to be paid quarterly,' and takes an assignment of his shares as col- 'Whilfl this is generally done, it has been held, as has been stated, u.sur- ious. See pp. 104, 105. METHOD OF MAKING LOANS. 135 lateral security, besides a mortj^age on real estate, to secure all the payments. Some associations modify this plan by only charging upon the amount received by the borrower. The borrower continues his payments until his stock has matured, when the association will cancel his mortgage and retire his stock, by applying the latter to the former. If he withdraws before maturity, a per cent of the premium is refunded to him. Tliis introduces a great element of uncertainty in the association's profits. These systems of loaning are practiced in some of the oldest societies. In Massachusetts, building associations known as co-opera- tive banks, may, by law, provide instead of bids for premium, a rate of annual interest upon the sum desired, payable in montlily instalments. In New York, the premium is charged as a bonus, and is deducteJ at the time of the loan without any rebate on withdrawal. Interest is charged on the full amount. The most popular and prevailing system is to loan the mem- ber the full amount of each share held by him and make the payment of premium and interest in instalments with the dues. For instance, a borrower of $i, 000 holding five shares of $200 each, bids twelve cents premium per share per week. He would be required to pay with his dues of lifty cents on each share, a premium of twelve cents and interest. If the latter were six per cent per annum, his total payments would be, dues $2 50, premium 60 cents, interest $1.20, making a total weekly payment of four dollars and thirty cents, of which one dollar and eighty cents is a profit to the association. The other $2.50 is a credit on his stock payments. The bor- rower on this basis pays 9.3t) per cent interest for the first year, but on his payments he receives a profit. Assuming that the association is receiving on an average the same pre- mium, and is able to make an annual net profit of 8 per cent, which would be a conservative estimate, the borrower's inter- est is net 8.8Jr per cent for the first year of his loan. The method of the computation is: He pa)'s to the association during the year in wei3kly instalnlents $180. The association has the use of all of it for half the time, and would, therefore, 136 BUILDING ASSOCIATIONS. pay to him a profit of .$5.20, or 8 per cent on $65.00. The second year, bis net interest would be 7.8 per cent; the third year, 6.7 per cent; the fourth year, 5.72 per cent; the fifth year, 4.68 per cent; the sixth and last year, 3.64, or an average of 6.23 per cent for the whole time. During that time be has paid in $780, which, with his dividends, will mature bis stock calling for $1,000. The amount he has paid weekly exceeds but slightly the rent cost, and he is thus enabled to discharge a debt he probably never could have met if he had to pay it all at one time. By distributing the payments over a series of years, the borrower is able by constant and successive efforts to dispose of a task, that were he to confront at one time would render him discouraged and hopeless. If he were to discharge the entire debt at one time in the future, its maturity would find him as unprepared as when it was contracted. The build- ing association marshals his forces for him and conducts him through to a place of safety. He becomes trained in his observance of its laws, and he is regular in his payments. The association has involved his greater interests and his watchful and persevering thrift strengthens it. In some associations the premium is charged as a whole and divided into a certain number of instalments, generally as many months as the estimated maturity of the association, and each fixed instalment is payable each month. There is still another manner of lendino;, ori'^inatino' with an Ohio association, the Dayton Mutual Home. This associa- tion has many imitators throughout the country and has itself achieved wonderful success. The shares in associations of this type are usually $100 and the dues are 25 cents on each share. The profits are distributed semi-annually, by crediting them on the pass-books of the members. Loans are made upon inter- est and premium payable weekly. The chief distinction between it and other associations is the opportunity of a mem- ber to extend the time of repaying his loan as he may desire from a period of six 3'ears to approximately fourteen years. The association gives him the privilege of paying the amount named as dues only, instead of adding thereto the premium and interest. That is, if his interest amounts to 12 cents per SOME RESTTLTS. 137 ■week and his premium to 6 cent» per week, 18 cents will be deducted from the 25 cents for the cost of the loan, and the balance will be credited on his stock. The advantage to the member is that he can regulate his payments accord- ing to his income, and \n%y, if he choose, take the longest time, about 11 years, by paying only the amount required as dues. Sec. 3 Some Results. Building associations have become enormous accumulators of money. Their growth is marvelous and attention is everywhere attracted to them. It is safe to say their assets exceed the combined capital stock of the National banks of the country. Tlieir profits are large and .«afe. People who have not investigated them are surprised at these statements, yet the facts support them. To give some idea of the workings and profits of associations in different states, the following figures collected from some of the sssocia tions will serve: The report of the Ohio state inspector of building associa- tions, just issued, states that there are 465 associations in the state. The total deposit of these associations on December 31, 1891, aggregated ^59,690,236. Of this sum $59,302,299 has been invested in mortgages. The total earnings of the associations for the year were $2,905,755, and the average of dividends declared, was 6.88 per cent. The total member- ship in the state is 233,100. One of the largest associations in the country is the Mutual Home and Savings Association, of Dayton, Ohio. It was organized April 19, 1873, with an authorized capital stock of $10,000,000. According to its report of December 31, 1891, it had mortgage loans of $1,489,980.26. The association earns 6 per cent interest for its paid ^lp stockholders and 7 per cent for its running shares. It has had $5,628,200 of its capital stock subscribed, and now has $3,056,500 in force, the difference having been retired or withdrawn. The Equitable Co-operative Building Association, of "Wash- ington, D. C, was organized in 1879, and its total receipts to March 15, 1892, were $7,403,899.50, with assets, October 15, 1891, of $1,272,311.01 and 5,338 shareholders, owning 15,371 138 BUILDING ASSOCIATIONS. shares. The association has had but two foreclosures since oro-anization, without any losses. It has matured considerable stock at a handsome profit. There are are about 45 associa- tions in the District. The Erie Savings and Loan Association, of Buffalo, New York, was organized in ISS-t, and, at the close of December, 1891, its receFpts had been $1,276,193.67; 14,301 shares are in force, held bj 1,673 shareholders. No dividends are declared, the stock being retired as it is matured. Three series have been paid since organization, showing a large profit. The association reports assets of $162,133.35 to mature the other 13 series. It has had but one foreclosure and no losses. The Homestead Savings and Loan Association, of Albany, New York, incorporated May 7, 1888, has assets of $261,324.39 and pays six per cent interest on paid up stock certificates. The other members receive a larger per cent. In Pennsylvania, there are invested in building associations, upwards of $65,000,000, and the outstanding shares number more than $1,000,000. In a recent report of secretaries to the Chicago Building Association News, and the Building Asso- ciation and Home Journal, of Philadelphia, the folllowing profits are shown: Norris Square, Philadelphia 8 per cent per annum. The Phoenix, " 9 " " The Solar, « 112-3 " « German Central, (2d) " 6.22 « « Allegany Avenue, " 10.76 " « The Daniel O'Connel " 14.38 « " The Lessing, " 12.95 « « Richmond Mutual, " 9.5 « « West End, " 9.S4 « « Carpet and Hosiery, " 10.46 « « Union, McKeesport, Pa., 13.67 " " • North Star, Philadelphia, 11 " " The Republic, " 10.5 '< " The Active, " 8.15 « « Ark, " 7.96 « The Ben Franklin , " 7.57 '■' "■ bOME KESUI^TS. 139 Energetic, Philadelphia 11.23 per cent per annum. Northern National, " 8.7G " " The Joseph B.Clausen," 9.73 " " Philadelphia, « 8.5 " « Model, Roxborongh, Pa., 9.58 " "' In New Jersey there are over 200 associaiicns, avid their average profit is 9.5 per cent. The Artisans, of Camden, reported net assets in its eighteenth statement, issued in May, 1891, of $110,087.98. Its profits are 9 per cent per annum on the investment. Tennessee Building Associations average 20 per cent profit. The Tennessee Mutual Building and Loan Association isi one of the leading associations in the state, and has morto-ao-e loans of $50,000 as the result of one year's operations, andi realized a profit of 22.8 per cent on the total capital paid in to the association. The associations in Maryland are generally good and work- ing very successfully. One of the largest, is the Provident' Building Association of Baltimore, which was organized in| October, 1887. Its trial balance of April 19, 1892, showed I assets of $562,255.47, and it has paid 6 per cent cash each year during its existence. Building Associations in Massachusetts are known as Co- operative Banks, and number about 110, with shares in force 353,069, and 49,441 members. The sum of $3,980,475,00' were paid in last year as dues, and the net profits were $G05,- 129.09. They have accumulated assets of $11,874,530,14, representing loans on real estate of $10,791,168,02 and cm shares of $520,800.67. In handling their loans, they have acquired real estate by foreclosure of $67,556,86. They have a surplus of $41,314,44 and a guaranty fund of $39,195,51. The average dividend is about 6.y per cent.' There are large banks in Boston, Maiden, Worcester, Camp bells, Taunton and Fitchbury. The Guardian Co-operative Bank of Boston began business August 6th, 1886, and has The figures -vvpre taken from Octo- ber last report by the state inspector. 140 BUILDING ASSOCIATIONS. assets of $169,749.04. The Homestead, began September 12, 1877, and ha3 assets of $333,172.82. The Pioneer started Anp^nst 6, 1877, and has assets of $355,112.74. The Maiden Co-operative Bank commenced May *9, 1887, and has assets of $126,580.67. It pays 7 per cent dividend and has never had any losses or a foreclosure. The Equitable Loan Association, of Wilmington, Delaware, was organized February 22, 1878, and has assets of $183,- 729.09. Its receipts have been $191,510.46 and it Las matured three series. Tlie last series represented a profit of of $51.41 on a share of $200.00. In Michigan, the associations earn about 20 per cent per annum for the average time. The Marquette Buildino- & Loan Association, organized in 1889, has assets in the sum of $118,- 677.49 without foreclosures or losses. The Northern Michi- gan Building and Loan Association of Hancock, organized in the same year, has assets of $131,116.05, its real estate loans consisting of $121,342.60. There are fifteen associations in New Hampshire, and their combined assets, $1,287,000. They have about 13,500 mem- bers. The profits are about 20 per cent. The Granite State Provident Association of Manchester, organized in 1888, has $813,000, invested in loans, with 11,000 shareholders, no los- ses and two foreclosures. The Concord Building & Loan Association begun in 1887, has real estate loans of $79,200, with 2,922 shares issued. Building Associations have grown very rapidly in Illinois in the past eight or nine years. The associations were con- fronted with constitutional objections that threatened their existence, but these were finally and favorably disposed of by the Supreme Court,* and these obstacles removed, they have a prosperous career. The Equitable Savings and Loan Homestead Association of Chicago, organized seven years, reports March 31, 1892, assets of $411,312.00. Its profits are about 11 per cent. The Dan- •Holmes v. Smythe, 100 111. 413; tion, 114 111. 183; Winget v. Quincy, Freeman v. Ottawa, etc., Associa- etc.. Association, 128 111. 67. SOME RESULTS. 141 ville Building A.ssociation received last year $220,754.85. It hfis been organized eleven years and represents the new growth of associations in the state. Its assets are $362,431.74 and it pays a fraction above 9 per cent profit. Associations are not numerous in AVisconsin, but they are steady earners. There are in the neighborhood of 100 associa- tions in the state. The Home Bnilding and Loan Associa- tion of Milwaukee, in four years, has accumulated assets of $105,334.81, and makes a profit of 12 per cent per annum, pajing 10 per cent cash, and carrying 2 per cent to the reserve fund. During its fourth year, to October 24, 1891, its receipts were $141,143.37. Associations are of recent development in Maine. The York Loan & Building Association of Biddeford, was orga- nized January 21, 1889, and has $31,295.02 in assets. It has had no foreclosures or losses and pays 8 per cent on the investment. A large association in Rhode Island is the Roger Williams Building and Loan Association. The other associations are at Newport, "Westerly and Woonsocket. The Roger Williams has been organized eleven years and reports assets of $582, 974.64. It has met with no losses and has had three fore- closures. Its profits have averaged a trifle over 7 per cent. The Homestead Association under the same management, is the second one in the City of Providence, and has been in business nine months and has received and loaned abouti $10,000. In North Carolina, the Wilmington Daily Review says: "We have seen here in Wilmington, some of the excellent effects derived from the establishment here of buildino- associations. There are six in operation. The consequence ,has been that real estate has held its own, even in strincrent times, and that new dwelling houses are going up continuously in every section of the city." The Wilmington Homestead and Loan Association, starting August 14, 1886, has assets of $104,809.61, with no losses or foreclosures, and a profit of 10 2-5 per cent net. The Mechanics' has had no losses or foreclosures and began 3 years ago. According to its second 142 BUILDING ASSOCIATIONS. annual statement, it had assets of $37,613.62 and paid a profit of llf per cent net. In West Virginia, the Eagle Building Association of Wheel- ing, is in its fourth year, and has assets of $83,672.31, showing a profit of about 10 per cent. In Minnesota, the assets of building associations reach into the millions of dollars, the great bulk being in St. Paul and Minneapolis. The state law requires a rigid inspection. The associations are prosperous and earn heavy profits. The Kice Street, of St. Paul, organized 9 years, has assets of $103,- 385.34, with no losses and a profit of 17 per cent for the aver- age time. The Seven Corners, organized in 1884, has assets of $66,790.39. The Globe organized in 1887, has assets of $31,- 567.32. The Columbia, starting November, 1880, has assets of $70,167.01. These associations are all under one management and show about the same results. In Minneapolis are located what are known as "J!^ational" Associations, i. e. associations making loans in the different states. They have accumulated enormous amounts of money, as for example. The Pioneer, organized six years, reports $1,632,400.60 assets and a profit of 8 per cent on the investment for the paid up shareholder and a larger return for its other members. In Mississippi, the Vicksburg Building Association is one of the largest. It was organized in 1870, and up to date has retired eleven series. Its monthly receipts are about $10,000, and it now has assets of $519,900.74, to help mature the remaining sixteen series. Its last year's profits jvere about 20 per cent. It has had no losses and not a foreclosure in the last ten years. Missouri associations are growing with great rapidity. The Prudential Building and Loan Association, of Kansas City, in three years has received deposits of $73,651.31 and has averaged a profit of 10 1-2 per cent per annum. In Kansas, their early history was a disappointment to their friends, and their prospects were discouraging, but since they * have become better understood, their advantages are receiving appreciation. The Leavenworth Mutual Building, Loan and Savings Association, organized three years, reports $68,218.72 SOME RESULTS. 143 of assets. The profits average about 15 per cent per annnm. Iowa associations, while not large, are snccessful. One of the oldest is the Council Bluffs Savings, Loan and Building Association, incorporated in 1877. It has never suffered a loss and has accumulated assets of $130,311.68, realizing a profit of about 12 per cent per annum. Building associations in Colorado are a growth of the past ten years. A few institutions had been working quietly prior to that time, " but to-day they have," so says the liepublican of Denver, "an acknowledged place, like the banks, among the financial institutions of the city." In Denver, there are about 15,000 shareholders in 31 associations, with combined resources of $5,500,000, and undivided profits approximating $2,000,000. During 1891 they loaned $1,750,000 in spite o"f a stringent money market. The profit realized is from 8 to 10 per cent. The Denver Home and Savings Association, in- corporated July 1, 1890, has assets of $108,013.65. The Peo- ple's Building and Loan Association, four years old, reports assets of $462,871.25. The Capital, of the same duration, has assets of $210,211.11. The Standard, during the same time, has accumulated $564,501.82 for its stockholders. The Home Mutual, organized in 1880, has assets of $403,082.43. The serial plan is the one usually adopted, and the instalment pre- mium is growing in favor, although most of the older associa- tions use the gross premium plan, and consequently, deduct the entire premium at the time of the loan, with a rebate on withdrawal. This has led to the " unearned premium," which unsatisfactorily creates uncertainty in the ultimate profits. The first of the above named associations is on the " Dayton plan," called such from the Mutual Home, Dayton, Ohio. There are a number of smaller associations outside of Denver, probably a dozen, all prospering. The Wyoming associations are not numerous, but profitable. Interest rates are high, and when premiums are tacked on, the profit is enormous, as is shown by the results of the Home Building and Loan Association, of Cheyenne, which, after one year of operations, accumulated $18,540.02 and paid its stock, holders 41 1-2 per cent. 144 BUILDING ASSOCIATIONS. In Oregon, in the principal cities and towns, building asso- ciations are becoming established. Their net profits average 14 per cent, per annum. The Franklin Building and Loan Asso- ciation, of Portland, is eiglit years old, has assets of $448,352.- 95, with 1,000 shareholders and has sustained no losses. There are about 135 associations in California, with assets of about $4,000,000. Six per cent, interest is paid on paid up stock, while running stock averages 10 per cent. The Home Security Building and Loan Association, of San Francisco, in- incorporated July 20, 1875, has assets of $573,804.87. The Home Mutual, organized six years, has assets of $170,171.- 95. The Commercial, five years old, has $95,347.05. The Homestead, six years old, has $206,568.00 and the Citizen's, in its seventh year, has assets of $109, 901.40. The Pioneer association, of Omaha, Nebraska, is the Omaha Loan and Building Association, organized in April, 1883. In about nine years it has handled $337,636.30 and paid off its first series, wherein the shareholder received $200 for $105 paid in. In Texas, the Dallas Homestead and Loan Association, organized in December, 1879, has assets of $400,000, without a loss and has averaged 18^ per cent per annum profit. The Mutual Building Association, of the same place, started in October, 1887, and has assets of $300,000, no losses, and has made 15 1-2 per cent. In North Dakota, The Fargo Building Association, com- menced business in March, 1880, and has assets of $19,308.39 and realizes a profit of about 10 per cent per annum. There are other associations at Grand Forks and Lisbon, all prosper- ing. In Indiana, the greater number of the associations are in the city of Indianapolis, there being about 120, with total weekly deposits of about $36,600. There are about 35,000 sharehold- ers, and the associations have loaned, within the past four years, it is estimated, $4,243,344, having collected $4,210,901. *The deposits, last year alone, it is estimated, were $1,600,000. The profits vary from 8 to 18 percent. The Star Savings and Loan Association has assets of $144,169.26 and realises an average profit of 15^ per cent per annum. SOME RESULTS. 145 The Aetna Saving and Loan Association, fonr years old, has assets of $179,284.52 and pays 18 per cent per annum. The German American Building Association, twenty months in business, has assets of $120,691.49 and pays eight per cent to paid up shareholders and a larger profit to installment stock. The Indiana Savings and Investment Company, three years old, has assets of $108,771.73 and pays its paid up sharehold- holders 8 per cent, per annum. Its running shares receive additional profit. Foreclosures are comparatively few and losses trifling. The same record is borne by associations throughout the state. They have the confidence of the people and are building up solidly. The variance in the profit showings, in the foregoing illustrations, is explainable where it is less by such causes as accumulated idle money or a dull demand for funds; however, some associations adopt low premiums as a policy and discour- age hio'h biddinsr. The figures above given do not include all the large and profitable associations in the different states. There are many others equally or more prosperous. The results illustrated by these associations were available and have been used to show the growth, security and profit of the building associations in the different parts of the country.* To readily understand the quick and increasing profits of an association, through the compounding of its interest, a glance at the four following tables will serve, 'The above figures arc taken from fused. Building associations should reports of the various associations, be compelled by law to publish at procured with care, but in a few least annual reports of their con- Btatea requests for reports were re- dition. 10 146 BUILDING ASSOCIATIONS. TABLE No. 1. Showing the accumulations of one dollar per month at 10 per cent interest, compounded monthly, for any number o£ months, from one to one hundred and twenty : o 6 o a CD o 6 31 Amount. 1 CO -I-' a o d a 53 O a DQ •5 o 6 o O a 1 1.01 35.50 61 79.74 91 136.49 2 2.03 32 36.80 62 81.41 92 138.64 3 8.05 33 38 . 12 63 83.10 93 140.80 4 4.08 34 39.44 64 84.80 94 142.98 5 5.13 35 40.78 66 86.52 95 145.18 6 6.18 36 42.13 6Q 88.25 96 147.40 7 7.24 37 43.49 67 89.99 97 149.64 8 8.31 38 44.86 68 91.75 98 151 89 9 9.38 39 46.24 69 93.52 99 154.17 10 10.47 40 47.64 70 95.31 100 156.46 11 11.67 41 49.04 71 97.11 101 168.77 12 12.67 42 50.46 72 98.93 102 161.10 13 13.78 43 51.89 73 100.76 103 163.45 14 14.91 44 53.33 74 102.61 104 165.82 15 16.04 45 54.78 75 104.47 105 168.21 16 17.18 46 56.24 76 106.36 106 170.62 17 18.33 47 57.72 77 108.25 107 173 05 18 19.49 48 69.21 78 110.16 108 175.50 19 20.67 49 60.71 79 112.08 109 177.94 20 21.85 50 62.23 80 114.03 110 180.47 21 23.04 51 63.75 81 115.98 111 182.98 22 24.24 52 65.29 82 117.96 112 185.51 23 25.45 53 66.85 83 119.95 113 188.07 24 26.67 54 68.41 84 121.96 114 190.64 25 27.90 55 69.99 85 l!^3.98 115 193.24 26 29.14 56 71.58 86 126.02 116 195.86 27 30.39 57 73.19 87 128.08 117 198.50 28 31.65 58 74.81 88 130.16 118 201.16 29 32.92 59 76.44 89 132.26 119 203.84 30 34.21 60 78.08 90 134.36 120 206.55 BUILDING ASSOCIATIONS. TABLE No. 2. 147 Showing the accumulations of sixty cents per month at 10 per cent interest, compounded monthly, for any number of months, from one to one hundred and twenty: ID a o '^ 6 O s -G C o d a 1=1 o a CO O d 61 -*-5 PI !=! O CO O d (3 O a < 1 .61 31 21.30 47.84 91 81.89 2 1.22 32 22.08 62 48.85 92 83.18 3 1.83 33 22.87 63 49.86 93 84.48 4 2.45 34 23.67 64 50.88 94 86.79 6 3.08 35 24.47 65 51.91 95 87.11 6 3.71 36 25.28 66 52.95 96 88.44 7 4.34 37 26.09 67 53.99 97 89.78 8 4.98 38 26.92 68 55.05 98 91.13 9 5.63 39 27.75 69 56.11 99 92.50 10 6.28 40 28.58 70 57.19 100 93.87 11 6.95 41 29.42 71 58.27 101 95.26 12 7.60 42 30.27 72 59.36 102 96.66 13 8.27 43 31.13 73 60.46 103 98.07 14 8.94 44 32.00 74 61.67 104 99.49 15 9.62 45 32.87 75 62.68 105 100.93 16 10.31 46 83.75 76 63.81 106 103.37 17 11.00 47 34.63 77 64.95 107 103.83 18 11.70 48 35.53 78 66.09 108 105.30 19 12.40 49 36.43 79 67.25 109 100.78 20 13.11 50 37.34 80 68.42 110 108.28 21 13.82 51 38.25 81 69.69 111 109.79 22 14.54 52 39.18 82 70.78 112 111.31 23 15.27 53 40.11 83 71.97 113 112.84 24 16.00 54 41.05 84 73.17 114 114.38 25 16.74 55 41.99 85 74.39 115 115.94 26 17.48 56 42.94 86 75.61 116 117.51 27 18.24 57 43.91 87 76.84 117 119.10 28 18.99 58 44.88 88 78.10 118 120.70 29 19.75 59 45.86 89 79.35 119 122.31 30 20.52 60 46.85 90 80.62 120 123.93 148 BUILDING ASSOCIATIONS. TABLE No. 3. Showing the accumulations of one dollar per month, at eight per cent interest, compounded monthly, for any number of months, from one to eighty: 00 ■*-> c o ;^ d PI pi o a tn C o 6 -•■3 PI pi o a en o d 41 PI pi o a 46.92 CO O d d PI o a 1 1.01 21 22.42 61 74.88 2 2.04 22 23.58 42 48.23 62 76.38 3 3.04 23 24.75 43 49.54 63 77.88 4 4.07 24 25.90 44 50.87 64 79.41 5 5.10 25 27.08 45 52.22 65 80.94 6 6.14 26 28.24 46 63.57 66 82.47 7 7.19 27 29.46 47 54.94 67 84.03 8 8.24 28 30.64 48 56.27 68 85.78 9 9.31 29 31.86 49 57.66* 69 87.12 10 10.37 30 33.04 50 59.02 70 - 88.72 11 11.45 31 34.27 51 60.62 71 90.32 12 12.53 32 35.49 52 61.85 72 91.90 13 13.62 33 36.76 53 63.24 73 93.52 14 14.72 34 38.07 54 64.65 74 95.14 15 15.83 35 39.24 55 66.09 75 96.78 16 16.94 36 40.47 56 67.55 76 98.43 17 18.06 37 41.76 57 69.00 77 100-20 18 19.18 38 43.05 58 70.45 78 101.73 19 20.32 39 44.31 59 71.91 79 103.43 20 21.46 40 45.61 60 73.40 so 105.00 BUILDING ASSOCIATIONS. 149 t3 t3 d • rl hi «w o 1—1 o cfi n o ♦-> •i^ (Tt CO ;h 4^ « S3 c O o TJ -^ r! cS M ^ tl o a S o .^ -kj 03 Ss ;-i «.,, ^ a ^ ^ p: o o Cj P to p *^ o o o» CO 00 CO o» o 7-1 t- -* CO C3 CO CO c« CJ •—1 o CI 1-( T-l 7-1 7-1 tH 7-H 0; m a, o 03 rv> 00 Tj< o »^ ■«J< ■,-i OS •^ eo (O Ci a» 00 00 00 l^ £- «» o — •^ O) CI t- c» CO -* o f- ^- — o •^ CO vi c» CI 7—1 7-^ 7—1 o o cs 1-1 »-< T-l »-« ^^ '"' ""* o ,„^ lO T-l CO CJ cs CO CO o to t- o o c» c» 00 CO c- t- t- »o »— ^ «« • o o CO t- «- CD ,^ 00 - ■<3' J^ ^^ CD ,^ CO .,_l CO o cs o o o lO Tj< ■^ CO CO CJ CJ 7-1 OS a. ©9 '"' '"' * ' ' "* ■^ o o -* ■<^ CJ o «3 CO lO •^ rj< eo eo CJ CJ o c> 1-1 7-1 7-1 1-1 1-1 OJ €© :^ t- Ci CD CI t- ■<* o t- 1—1 c* c> o o a» IS, 00 GO 00 c- c- CO ^-H l-H 1— * ^ c r- Oi o ■ 00 00 00 t- CO C5 '^ ■^ T-H T-l •"■* ZZi lO •^ IO 1- o CO c- CJ c- c- CJ ■t-i o cs 00 t- CD CO lO Tf •^ CO CJ 7-1 O c» 1-1 V-H 7-1 7-1 T— 1 7-1 7-1 tH 7—1 T-l u a> 6» o t- 3» c^ lO o CO 1—1 c- CO <- CO P. o o* 7-1 o o cs OS 00 00 t- CO 00 €© ^ *"* O £— CD IC c- OS ,— , lO CO CO eo c- •4J o c> CJ CO £- CO o o • c^ T-( 1-1 7-1 <0 «• o CO t- o •>K OS -3< cs CO cs 00 Ot o CO o« o OS c; cs 00 t- CO t- <» '"' o o CO CO t- 00 o CO CO o cs T-f *3 o CJ o Oi co I- t- CO »o to CO c» O M OJ CJ 7-1 T— 1 7—1 7-1 7—1 «« o OS C5 ,_l rf CO eo 1— CO cs 7-1 o P< o CO c^ o 7—1 o o OS OS oo oo t- CD ii» *"* ' ^ *"* o CD c* c: CO (» o> _4 *71 CO •£> t- o cs CO c» o o CS cs 00 t- lO ;/» '~* '"' ' ' '"' IM DO OT 1 1 j 1 ; 1 } [ ; • 1-4 e-i Ed 2 s - 3 t 3 a - 3 o o C4 ae a. o lO o lo o lO o to o T-l 1-^ to iO «3 to t- t- 00 00 «» APPENDIX. STATUTES AND CONSTRUCTION. The following references show where the statutes, and deci- sions construing them, which relate to building associations in the different states, may be found. Alabama. See Code 1886, sections 1553, et seq.; Statutes 1888-9, p. 31. Arkansas. Organized under general stock company statute of 1869; Digest Stat. 1884, sees. 960, et seq.; See Acts 1883, p. 227; Statutes 1884, sections 5644, et seq. California. See 2 Deering's Codes, sections 283, 571, 679. Colorado. See Laws 1889. p. 41, et seq. Connecticut. See Gen. Stat. 1888, sec. 1, where it is provided that the term "saving banks" shall inchide savings societies, and see chapter CX., concerning "Savings Banks." Construction of the act of 1850; Mutual Savings, etc.. Asso- ciation V. Wilcox, 24 Conn. 147, 154; Id. v. Meriden, etc., Company, 24 Conn, 159; and see West Winsted, etc.. Associa- tion V. Ford, 27 Conn. 282; Id. v. Kice, lb. 293; Babcock v. Middlesex, etc., Bank, 28 Conn., 302. Dakota. See Compiled Laws, 1887, sections 3166, et seq. Delaware. See Laws 1875, p. 188; Special Incorporations, see Acts 1877, 1891. (153) 154 BUILDING ASSOCIATIONS. Florida. See Act of May 31, 1887; also Acts 1889, p. 115. Georgia. Incorporated by decree of court; See Code 1882, sections 1674, 1676; Construction; See Eedwine v. Gate City etc., Association, 54 Ga. 474; see also In re. Deveaux, lb. 673; See R. S. 1882, section 3968; Acts 1888, p. 47; Acts 1889, p. 180; Acts 1890-1 part 1, p. 176; Construction; See McGowan v. Savannah, etc., Association, 80 Ga. 515. Illinois. See Starr & Curtis, Ann. Stat.. Yol 1, pp. 629, et seq. ib., Yol. 3, p. 282. Former Statutes; Laws 1869, p. 105; 1871, p. 173; 1879, p. 83. Indiana. See Elliott's Supp. Sections, 840, et seq. Iowa. See McClain's Ann. Code, Sections 1290, 1784-87. Kansas. See General Statutes 1889, sections 1424, et seq. Statutory Construction; see Salina etc., Association v. Nelson, 22 Kans. 751. Kentucky. Incorporation by special enactment. Lousiana. See Acts 1888, pp. 177, 212. Maine, See E. S. 1883, p. 435, sec. 132 ; Acts 1889, p. 146 ; Acts 1891, p. 64. Maryland. See Pub. Gen. Laws 1888, p. 312; Statutory Construction; See Border State, etc., Association v. Hayes, 61 Md. 597. Massachusetts. See Pub. Stat. 1882, pp. 134, 572, 667, 1004. Suppl. Publ. Stat. 1888, pp. 63, 64, 103, 276, 648, 549; Acts 1889, pp 893, 1177; Acts 1890, pp. 60, 71, 213, 262; Acts 1891, pp. 722, 1010. Statutory Construction; See Baxter v. Mclntire, 79 Mass. 168; Manahan v. Yarnum, 77 Mass. 405; Cook v. Kent, 105 Mass. 246. Michigan. See Howell's Ann. Supl. Statute 1890, Sections 3981, et seq. APPENDIX. 155 Minnesota. See Statutes 1891, sections 1421, et seq., and 2409 et seq. Statutory Construction; see State v. Eedwood Falls, etc., Association, 45 Minn. 154. Mississippi. Incorporation by special enactment; see Acts 1886 pp. 20, 35; Acts 1888, p. 17; Acts 1890, p. 10. Missouri. See R. S. 1889, Sections 2808, et seq.; Acts 1891, p. 74. Statutory Construction; See Ma^uire v. State, etc., Association, 62 Mo. 344; State v. McGrath, 95 Mo. 193. Montana. See Comp. Statutes 1888, pp. 795, et seq. Nebraska. See (^orap. Statutes 1887, p. 258; Stat. Laws 1891, Chap. 14, p. 200. Kew Hampshire. See Public Statutes, 1891, pp. 204, 205, 459, 460, 472, et seq. New Jersey. See E. S. Suppl. 1886, pp. 69, 70, 138, et seq. R. S. 1877, pp. 92, et seq. and p. 1272; Acts 1887, p. 62; Acts 1888 p. 36; Acts 1889, p. 299; Acts 1890, pp. 420, 427, 441. Statutory Construction; Savinojs Association v. Vandervere, 3 Stock, 382; People's, etc., Association v. Furey, 20 Atl. Rep. 890; Vanneman v. Swedesboro, etc.. Association, 15 Stew. 263; Newton Tp., etc.. Association v. Boyer 15 Stew. 273; Washing- ton Association v. Creneling, 10 Yr. 465; Id. v. Horn baker 12 Vr. 519; For bill in equity held defective, see McNeal v. Florence, etc.. Association, 13 Stew. 351. New Mexico. See Acts 1887, pp. 22, et seq., also amendatory act of 1889; Acts 1889, pp. 266, et seq. New York, xiuthorized by manufacturing acts 1879, 1880, 1884. See P. S. 1889, pp. 1587, et seq.; See also P. S. 1890, (Birdseye Ed.) pp. 343, et seq.; Laws 1891, p. 318. Statutory Construction; see Franklin etc., Association v. Mather, 4 Abb. Pr. 274; Second Manhattan etc., Association v. Ilayes, 2 Kejes 192; Remington v. King, 11 Abb. Pr. 278. 156 BUILDING ASSOCIATIONS. North Carolina. See Code, "Vol. 2, Chap. 7, Sec. 2,294, et seq; Battle's Kevisal, pp. 105, et seq. Laws 1881, p. 604; Laws 1891, p. 1,041. Ohio. See 1 E. S. 1890, sections 3,81T, 3,883, et seq and 3,935.; Laws 1891, pp. 469, et seq. Statutory Construction; Windhorst v. Building Association, 7 Bull. 29; Licking County, etc., Association v. Bebout, 29 Ohio St. 252; Forrest City, etc.. Association v. Gallagher, 25 Ohio St. 208; State v. Building Association, 35 Ohio St. 258; Bates v. People's, etc.. Association, 42 Ohio St., 655. Oregon. For incorporation, see general statute for private corporations, 2 Hill's Ann. Laws, sees. 3,217, et seq; also. Laws 1891, p. 131. Pennsylvania. See Brightley's Purdon's Digest, pp. 223, et seq. Acts 1891, p. 174. Statutory Construction ; See Cooper V. Association, 100 Pa. St. 402; O'Rourke v. Building Asso- ciation, 8 W. N. C. 176; Houser v. Herman, etc., Association, 41 Pa. St. 478 ; Marble, etc.. Association v. Hocker, 3 Phila. 494; Building Association v. Eshelbach, 7 Phila. 189; Spring Garden Association v. Tradesmen's, etc.. Association, 46 Pa. St. 493; Springville, etc.. Association v. Raber, 33 Leg. Int., 329; Snider's Estate, 34 Leg. Int. 49; Schober v. Accommodation, etc., Association, 35 Pa. St. 223; Building Association v. See- miller, 35 Pa. St. 225 ; Philadelphia, etc.. Association v. Moore, 21 Leg. Int., 109; Flounders v. Hawley, 78 Pa. St. 45; Wol- bach V. Lehigh, etc.. Association, 4 W. N. C. 157; Jarrett v. Cope, 68 Pa. St. 67; Rhoads v. Hoernerstown, etc., Associa- tion, 82 Pa. St. 180; Building Association v. Building Asso- ciation, 100 Pa. St; 191; Commonwealth v. Association, 2 Chest. 189; Association v. Commonwealth, lb. 546; Building Association v. Commonwealth, 98 Pa. St. 54; Abbott v. Build- ing Association, 1 Del, 397; Building Association v. Robin- son, 46 L. I. 5; Hansbury v. Pfeiffer, 35 L. I. 395; Heckman V. Building Association, 11 L. Bar. 110; Link v. Building Association, 89 Pa. St., 15; Rowland's Estate, 1 Del. 98; Fred- ericks V. Corcoran, 100 Pa. St. 413; Building Association v. APPENDIX. 157 Hanlen, T Lnz. L. Keg. 165; Becket v. Building Association, 88 Pa. St. 211; Selden v. Building Association, 32 P. F. Sm. 336; Building Association v. Iloarj, 8 Luz. L. Reg. 180; Saving Fund v. Longshore, lb. 199; Sherman, etc., Association V. Rock, 9 Phila., 75; Building Association v. Coleman, 89 Pa. St. 428; Miller's Estate, 2 Pears. 348. Rhode Island. Incorporated by special enactment. South Carolina. Special incorporations; Bee Acts 18S3, 1886, 1887, 1888, 1889; General Statute, Acts 1885, p. 40, Act8l888, p. 46. Tennessee. Incorporation by special enactment. See Code 1884; Sections 1742 et seq.. Acts 1891, p. 17. Texas. Incorporated under Clause 17, Article 566, Sayle's Civil Statute concerning " Corporations." Utah. See Acts 1890, p. 7. Virginia. See Statues 1852, pp. 81-3; see also Code 1887, Sees. 1145, et seq. The Richmond Perpetual Building, Loan, and Trust Company was incorporated by special enactment. See Act of March 30, 1875, amended March 2, 1888. Statu- tory Construction ; Davies v. Creighton, 33 Grat. 606. Wisconsin. See Sanborn 33. Is the property rented?. 34. How much per month?. 35. Have you ever applied for a loan on this property? 'If BO, from whom ? What result ? 36. If occupied by a tenant how much would it bring per month ? 37. What is the value of the ground without the improve- ments? What is the value of the improvements in their present condition?. 38. What is the estimated cost of the improvements to be made? 39. Is the title perfect in applicant? 40. The property is assessed for taxes ; ground $ APPENDIX. 183 Improvements $ Are taxes all paid to date? 41. Is the sidewalk in front of the property curbed and paved? 42. Is the bed of the street paved? 43. Are gas pipes laid in the street? 44. Are water pipes laid in the street? 45. Is the property incumbered in any way by mortgage or mechanic's liens, unpaid taxes, judgments, suits pending or liens of any kind? If so, state the nature, date, maturity, and amount of incumbrance and by whom held. 46. Can the liens on the property be paid now? 47. For what purpose is the money borrowed? 48. Do you wish this loan to be made in installments as the building progresses or on completion of the improve- ments? 49. Does your wife consent to join in the bond and mortgage? 50. What could the property be sold for now in cash ? 51. What would it bring at forced sale now? 52. What is the cash value of all the property owned by you? Real estate personal 53. What are your total liabilities at this time? If this application is accepted, I will furnish, at my own expense, a com])lete abstract of title to the land proposed as security, and have the same certified to be correct by the proper party, which abstract shall be brought down to a date subsequent to the approval of my application for the loan, and 184 BUILDING ASSOCIATIONS. show a clear and perfect title in the applicant. I agree to pay the expenses of examination and appraisement of the property and for examining the title and recording the mortgage and making of the papers. The secretary of the association is hereby authorized to procure an abstract of the property herein offered, as security, and a policy of insurance on the buildings thereon, unless the same shall be furnished by me as soon as required by the board of directors, or the rules of the association, and to deduct the cost of the same from the proceeds of the loan, together with all other costs or indebtedness connected therewith, and to pay therefrom any judgments, taxes, liens or incumberances of any kind whatever, which may exist against the property at the time of closing the loan; and if this is a building loan, I ao-ree, before any payments are made on the same, to furnish the secretary a complete list of all contractors, or sub-contrac- tors, or parties furnishing material or work for the said build- ino-s, too-ether with the amounts of their several claims, and their signatures, waiving all senior rights of Ilea, for any amounts, in excess of the same, unless my contractor furnishes a satisfactory idemnifying bond to the said association. I also ao-ree to be governed by rules in force, concerning loans, a copy of which I acknowledge receipt. The applicant herein warrants that the representations above made are true, and agrees that they shall form a part of the consideration of a mortgage, which may hereafter be executed by said applicant to said association, to secure such loan as may be granted, and if there is any misrepresentation in said application, it shall operate as a default in conditions of said mortgage, and render the debt due and the mortgage may be foreclosed. APPRAISER'S REPORT. '^ ' {-83. (JOUNTY ) We, the undersigned, do solemnly swear that we are all well State of APPENDIX. 185 acquainted with the value of real estate, described in said appli- cation, and with the property described in the within appli- cation, and that the ground without improvements is worth in cash $ , and the buildings are worth iacash $ , and the improvements to be made will cost dollars. The property would bring at forced sale, in cash, at the present time, ^ We are also personally acquainted with , mentioned in the within application, and believe him to have good standing and credit. AVe regard as a prompt, upright, reliable person, pecuniarily respon- sible for contracts, and we believe that he will prompt- ly meet all payments of principal and interest on the loan herein applied for. AVe believe this property is adequate security, with improvements, present and proposed,. for a loan of $ We are not interested in said premises, nor in the result of this application for a loan. Signed, , [SEAL.l (Notarial Certificate.) , [seal.] Rules of Saving: and Loan Association, governing the bidding for loans, the manner of making payments to builders and other information for borrowing stockholders. 1. The regular periods for the sale of money are the nights in each month, prescribed in the by-laws. 2. Bidders for preference in loans mnst state the number of shares they are bidding upon and the amount per share they are willing to pay. 3. Immediately upon the acceptance of his bid, each appli- cant shall pay into the hands of the secretary the sum of ... . dollars, to be paid to the members of the ap])raising com- mittee, for services in appraising property within the corpo- rate limits of ... .or. .. .dollars for like services outside of said limits: The proposed borrower should promj)tly call at the office of the attorney of the Association, taking with him his abstract to title to the real estate to be offered as security; 186 BUILDING ASSOCIATIONS. in case he has no abstract of title he should take his deed; at the attorney's office a written application and all necessary legal papers will be prepared. 4. The fees of the attorney, notary, abstracter, county recorder, and insurance premiums, shall be noted on the first warrant drawn in favor of the borrower, and be retained for, and paid to them by the treasurer from the amount so drawn, unless sooner paid from the private funds of the borrower. 6. The payment of premium and interest shall begin with the date of execution of bonds and mortgages to the Association. 5. On the receipt of the written certificate of the attornev, that title to security offered for a loan is perfect, and all legal requirements having been complied with by the borrower, the secretary shall draw warrants in favor of the person to whom the loan is made, for amount not exceeding cash in hands of the treasurer, and be subject to the conditions preceding and following this rule. 7. Should the borrowing member desire to build upon or improve his property, the money may be advanced in install- ments as the work progresses; but no money shall be paid until the plans and specifications for the work have been submitted and approved, and a contract or contracts have been made with responsible parties, said parties in all instances to execute a good and satisfactory bond, conditioned to indem- nify the Association' from any and all loss that may arise from said improvements, by reason of mechanics or other liens. Should the borrowing member however, desire to make more extensive improvements than called for by the amount of money borrowed, he will be at liberty to do so by pajing^ the said extra improvements, prior to any payment made by the board of directors, and shall furnish receipts showing proper expenditure of the same to the secretary. 8. The money shall be advanced in installments as follower The first payment when the property is secured and foundatioa APPENDIX. 187 completed and the contract or contracts are signed as above, and indemnifying bond given as above provided. The second payment when the frame is up and the building en- closed. The third payment when the plastering is on. The last payment when the house is finished. 9. No building shall be considered finished until a good supply of water is provided. 10. The manner of making payments, however, may he changed by the board of directors so as to meet the require- ments in special cases. 11. The payments must be so arranged that at least one fourth of the whole amont of the loan shall be retained for the last payment. 12. A bidder failing to perfect his loan for a period of thirty days after the date of his bid, shall incur the penalties provided for in Section 33 of the by-laws of this Association. 13. Borrowers on stock securities will be governed in all respects by the provisions of Sec. 36, of the by-laws of this Association. 14. Loans shall not in any case exceed 66f per cent of the value of the security offered, after completion of all contracts on the part of the borrower. 15. The board of directors reserve the right to strike out, amend, modify or change any of their rules, whenever deemed by it advisable so to do. MORTGAGE NOTE. 189.. For value received, I, we, or either of us, promise to pay to the Association, of , the sum of dollars, with interest at the rate of .... per cent per annum, from date until paid, and attorney's fees. II BUILDING ASSOCIATIONS. The said interest and premiums to be paid in instal- ments, on or before tlie .... day in each . . . ., from and after this date. And as collateral security for this note, . . hereby transfer and assign .... shares of the capital stock of said association and agree to pay dues, lines and other charges on said stock, as provided in the by-laws of said association. This note to be due when such stock matures, as provided in the by-laws of said association, and such matured stock may be applied in full payment thereof. BOND. GENERAL. FORM. This form of bond may be used in those states where a form is not herein given for a state, and has been prepared after con- sulting bonds used in different states. Know all men by these present, that , of county, in the State of , held and firmly bound unto the Association, of , in the sum of .... hundred dollars, together with ten per cent attorney's fees, which well and truly to be paid, bind .... heirs, executors and administrators firmly by these presents. Sealed with 189... seal and dated this day of The conditions of this obligation are such; That whereas, the above bounden obligor, , has subscribed for shares of the capital stock of $ , each in said association, for which share. . of stock. . he received from said association the sum of hundred dollars, as a loan, which shares of stock are hereby transferred as collateral security for the payment of this bond, with agreement on ... . part that . . he . . will continue to pay .... dues on the said shares of stock, at the rate of .... cents per .... on each share, together with a premium of per .... on each APPENDIX. 189 share of stock,' and interest on said loan at the rate of ... . per cent per annum, all payable on or before the .... day of . . . . , until such share . . mature, as provided by the by-laws of said association ; also, pay all lines and assessments on such shares, as provided for in said by-laws. All payments of money hereunder shall be made at the office of the association, in the city of Now, if the above bounden obligor shall, well and truly keep and perform said bond in every part, without fraud or delay, then the above obligation to be void and of no effect, but if default be made in any part thereof, then the above bounden obligor is to forfeit all the premiums, fines, assessments and intei-est so paid into said association, and pay back said loan, less all such dues credited' thereon.^ All payments of money hereby secured, shall be made with- out relief, from valuation or appraisement laws. MORTGAGE. GENERAL, FORM. The following form of mortgage may be used in the states, other than those where the forms are hereinafter given. It has been prepared after consulting the forms in use in the differ- ent states: ■ This indenture witnesseth; That 'In associations in New York, bond, to appear for the said... where the premium is deducted at heirs, executors or ad- the time of making the loan, this ministrators, at the suit of the said clause is omitted. corporation, its successors or as- *0r the surrender value of the signs, on the above obligation, as of stock. any term prior or subsequent to the »In Delaware the following clause date hereof, and thereupon to con- is added: fess judgment for the above sum of And do hereby authorize and dollars debt, besides empower any clerk, prothonotary or cost of suit, by non sum informntus, attornpy of any court of record, in nihil (licit, or otherwise, with stay America, or elsewhere, in case of of execution until the day of pay- default in the conditions of said ment. 190 BUILDING ASSOCIATIONS. (or do grant, bargain, sell, convey and confirm unto)* of county. State of , mortgage and war- rant to the Association, a corporation incorpo- rated and existing, by virtue of the laws of the State of , the following real estate, situated in county, State of , and described as follows, to wit: together with all and singular the tenements, hereditaments and appurtenances thereunto belonging, or in any wise apper- taining, for its own use, benefit and behoof forever. This mortgage is intended and executed as security for the performance of the stipulations and agreements of a certain bond'' of eveii date, herewith executed by said , as obliofor to said association, in the sum of hundred dollars, which is a just and full loan, made to said , under the rules and by-laws of said association, at an author- ized meeting of the board of directors, upon a certain written application therefor, by said . . . . , which application is made a part of this mortgage. Conditioned, that the said shall continue to pay monthly dues upon .... share., of $ , each of the capital stock of said association, at the rate of .... cents per on each share of stock, and .... premium per .... on each share of stock, and interest, od said loan, at the rate of .... per cent per annum, all payable on or before the day of each , until such share. . mature, as provided by the by-laws of said association ; also pay all fines and assessments on said shares, as provided in said by-laws, and to pay all money herein provided for, at the office of the association, in the city of And it is further agreed, if the said obligor .... shall well and truly keep and perform said bond in every part, then 'Instead of "mortgage and war- rant'' this clause is used in the fol- lowing states: North Carolina, Kansas, Oregon, North Dakota, Arkansas, Connecticut, Nebraska, Wisconsin, Maine, Florida, Rhode Island and Wyoming. *If a note is used as in California, Oregon and New Mexico.the clauses identifying the bond should be omitted and the note (see form) in- corporated in full. APPENDIX. 191 said bond to be void and of no effect, and tliis mortgage shall be cancelled; but if default be made in any part thereof, the above obligor. .. .to forfeit all the premiums, fines, assess- ments and interests so paid into said association and pay back said loan, less all dues credited thereon. The mortgagor. ., further agree, .to keep such mortgaged premises in good repair, to pay all taxes, assessments and charges thereon as the same become due, not commit or suffer any waste of said property, and to keep the improvements on said real estate insured in some responsible insurance com- pany, to the satisfaction of the board of directors of said Association, in the sum of $ for the benefit of said Association, and to transfer such insurance to said association, and deliver the policies for said insurance to said association, to be held as collateral security until the loan is fully paid. In the event said mortgagor . . . fail . . to pay said taxes or assess- ment, or keep said property insured, said association may do so, and the cost thereof, with .... per cent interest, shall be collectible under this mortgage. The mortgagor .... further agree. .. .that upon default of any of the conditions of this mortgage, or of said bond, in any part thereof, for a period of ,said bond shall with- out notice (notice being hereby expressly waived), at the option of the board of directiors of said association, be and become 'due and collectible, either by suit upon said bond, or by the ■foreclosure of this mortgage; and upon such default occur- ring, it is agreed that the mortgagee shall have possession of the said premises during the redemption year, and a receiver .may be appointed to take possession of the said premises, for •the purpose of applying the rents and profits thereof to the payment of the debt secured by this mortgage, which receiver- ship shall continue from date of such default until the said premises shall be redeemed according to law, or until such year expires. It is further agreed, that all of said payments herein men- tioned, shall be made without relief from valuation and ap- praisement laws, waiving and releasing homestead exemption 192 BLriJLDING ASSOCIATIONS. laws. All moneys payable under this mortgage may at any- time be required in gold coin of the United States. No failure to exercise this right by the mortgagee shall operate as the waiver thereof. ^ And the said mortgagor for heirs, executors and administrators, covenant .... and agree that he ... . well seized of the premises conveyed, as of a perfect, absolute and indefeasible estate of inheritance in fee simple absolute, and ha good right, full power, and lawful authority to grant, bargain, sell and convey the same in manner and form aforesaid, and that the same are free and clear of all incum- brances, and that . . . , he . . . will forever warrant and defend said land, unto said mortgagee or its assigns, against all claims to the same. The said wife of said mortgagor, by join- ing in this mortgage, relinquishes all her interest in said prop- erty, as against the said association. In witness whereof, said mortgagor., ha., hereunto Bet hand . . and seal . . this day of 18 . The acknowledgment by the mortgagors should follow, and, as its form depends upon the law of each state, governing acknowledo-ments to instruments for record in such state, and differs in many states, no form is here given." It is easilj ascertainable from any conveyancer. 'This clause is added in the forms shire, Minnesota, South Carolina, used in the following states : North Oregon, Ohio, Georgia, New York, Carolina, Kansas, Oregon, North North Carolina, (Alabama and Penn. Dakota, Arkansas, Connecticut, sylvania, where party is unable to Nebraska, Wisconsin, Maine, Flo- -write), Colorado, Connecticut, Flori- rida, Rhode Island and Wyoming. da, Idaho, Lousiana, Michigan, Ne- *In the following states and terri- braska, Rhode Island, for married tories the signing of a mortgage woman, Utah, Vermont, "Virginia, must be attested by witnesses, in Washington, Wisconsin and Wy- addition to acknowledgment, bo- oming. fore it can be recorded : New Hamp- APPENDIX. 193 In the following states and territories, North Carolina, Ala- bama, Arkansas, Montana, Rhode Island, Wyoming, Michi- gan, Maryland, JSTevv Mexico and California, this clause is to be added: It is farther understood and agreed, that if any default, as aforesaid, shall be made by said or his grantee, then it shall be lawful for said association to sell said real estate at public (or private)' sale in said county, for cash or upon such other terms as said association may deem best, after notice, by publishing in a proper newspaper, published in said county, and thereafter said association may convey in fee simple, such land to the purchaser or purchasers thereof, freed from any claim, title or right of redemption of said mortgagors, or either of them; and out of the proceeds of such sale to retain the amount due said association, on account of said loan, together with all costs incident to such sale and conveyance, and the balance, if any, remaining, shall be paid to said The association may loan its shareholders on their stock up to its surrender value. In such cases, the following form is used: Association. Collateral Transfer for Loans. I, the undersigned, shareholder in the above named Asso- ciation, do hereby assign, transfer, and set over to the said Association, all my right, title and interest in and to the num- ber of shares (in the particular series) of the capital stock of said association, indicated below, said shares to be held by said association as collateral security, (in addition to note given) for payment of loan made to me by said association. I hereby bind myself to continue to pay the monthly dues upon each of the several shares, and all lines, if any, and to be governed in all respects by the by-laws of said association. 13 *Just as the statute may provide. 194 BUILDING ASSOCIATIONS. Loan. Book ITo Shares of Ser iea On Shares $ . . Shares of Series Monthly Interest ', Shares of Series Monthly Premium Dated. Signature of Witness. Signature of Shareholder. Note. $ 18... Having this day pledged and transferred to the. . . .a corpo- ration duly established by law shares of its capital Btock, said shares being.... in the ....series as collateral security, for the payment of the suras herein mentioned, upon which shares the sum of dollars ($ ) has been advanced to me, by said association, for value received, on demand after date, I promise to pay to said association, or order, t)ie sum of dollars (S ) and until the payment of said sum of dollars ($ ), to pay to said association, or order, the sum of dollars ($ ) at or before the stated meetings of the board of directors of said association on the second of each and every hereafter, being the amount of the dues on said shares of the interest and premium upon said loan or advance of dollars ($ ) for which said shares are pledged and this note given, together with all fines chargeable by the by-laws of said association, upon arrears of such (monthly) payments. Signed in the presence of rorm of Trust Deed. Trust deeds are used in the following States and Territories: Missouri, Mississippi, Utah, Tennessee, Yirginia, West Yirginia, New Mexico, and also District of Columbia. APPENDIX. 195 This indenture made and entered into this day of , A. D., 18 bv and between of the County of State of part of the first part, and County of , State of.... part of second part, and the Association, a corporation 4uly organized under the lawB of the State of part of the third part. "Witnesseth: That the said part of first part, in consid- eration of the debt and trust hereinafter mentioned and created, and the sum of One Dollar to paid by said part of the second part, the receipt of which is hereby ac- knowledged, do by these presents grant, bargain and sell, convey and confirm, (or convey and warrant), unto the second party of second part, the following described real estate, sit- uated in the County of , State of . , and possession of said premises, now de- liver unto said party of second part. To have and to hold the same, with the appurtenances to said party of the second part, and to his successors hereinafter designated, and to the assigns of him and his successors for- ever; in trust, however, for the following purposes: Whereas, the said part of the first part, by certain bond (or note) duly executed and delivered, bearing even date herewith, are bound unto said association, party of the third part, in the sura of dol- lars ($ ) lawful money of the United States of America, loaned by said association to said part of the first part, on shares of stock owned by (in series ) of said association, being at the rate of dollars on each share, conditioned that said part. — of the first part heirs, executors and administrators, do., well and truly payor caused to be paid, unto the said association, its successors or assigns, in lawful money, the interest to accrue on said sum of dollars; at the rate of .... per cent per annum, payable on the.... 196 BUILDING ASSOCIATIONS. of each and every hereafter, and shall also well and truly pay, or cause to be paid, unto said association or assigns, the sum of dollars on the day of each and every hereafter, for the contribution or dues on shares of the capital stock of said association now owned by said until the value of said stock shall be suthcient to divide to each and every share thereof, the sum of two hundred dollars, ($200.00), and shall also well and truly pay, or cause to be paid, to the said association, its successors or assigns, the sum of. . . dollars on said of each and every hereafter, for the premium upon the amount of said loan, and shall fully indemnify and save said association from all losses by reason of said loan, according to the by-laws, rules and regulations that are or may be made by the said association, and also that will promptly pay all taxes or liens of whatsoever nature, levied or assessed upon said real estate, described in this deed of trust, within the limited time by law for the payment thereof, and also that will keep the buildings upon said real estate as herein described, con- stantly insured in some responsible insurance company or companies, to be approved by the directors of said association, in a sum not less than dollars, and the policy or policies of such insurance duly assigned and de- livered to said association; and also pay all lines and assess- ments asainst said shares. Said bond further contains an express covenant and agreement on the part of said part of the first part to and with said association, that if, at any time, default shall be made in the payment of said interest on said sum of dollars, or in the payment of the monthly contributions or dues on said stock, or in any monthly payment of the sum provided in said bond, and herein to be paid as premium on said loan, or tines or assessments, the same or either of said sums shall remain unpaid for the space of six months after any payment thereof shall fall due, then, and in such case, the whole principal debt aforesaid shall, at the option of said association, their successors and assigns, immediately thereupon become due and payable and recover- I i APPENDIX. 197 able; and the payment of said principal sum and all interest thereon, as well as contributions on said shares of stock, whatsoever due, may be recovered by sale, under said deed of trust, or other legal proceedings, as provided by law, and also if any taxes or liens whatsoever lawfully levied or assessed on said real estate remain due and unpaid, or if said real estate shall be advertised for sale for the payment of taxes, or if the said shall fail or neglect to keep said buildings constantly insured, and the policy or policies of insurance duly assigned to the said association, then the said association, may at its option, proceed to recover the whole amount due by the provisions of said bond; or the said association may pay said taxes or liens, or redeem said real estate from sale for taxes or liens, and cause said buildings to be insured for the amount above specified, and the amount of taxes or liens paid and amount of premiums paid for said insurance, by said association, shall be added to the record as a part of the amount secured by said bond in this deed of trust; and the same shall bear interest at the rate of per cent per annum, until repayment shall be made to said association, and also that the part of the first part, shall pay all necessary and proper costs and expenses of whatsoever nature, incurred about the collection of this trust, including a reasonable attorney's fee, costs of sale, or other legal proceedings thereunder. Now, therefore, if the said part.... of the first part shall fully and faithfully comply with the conditions, provi- sions and agreements contained in said bond, and, in this deed of trust, according to the true tenor and effect thereof, then this deed shall be void, and the property hereinbefore conveyed shall be released at the cost of said part .... of the first part. But should the said part. . . .of the first part, fail or refuse to comply with such conditions, provisions and agreements contained in said bond, and in this deed of trust, then this deed shall be and remain in full force and effect, and the said party of the second part, or is case of his absence or death, or refusal or disability to act in anywise, the then acting sheriff lyb BUILDING ASSOCIATIONS. of County at the request of said association, its successors and assigns, may proceed to sell the property hereinbefore described, or any part thereof, at public vendue, to the highest bidder, at in County for cash, first giving day's notice of the time, place and terms of sale, and all the property to be sold, by advertisement in some newspaper, printed and published in County and upon such sale shall execute and deliver a deed of conveyance of the property sold to the purchaser or purchasers thereof, and any statement or recital of fact in such deed, in relation to the nonpayment of money hereby secured to be paid, existence of the indebted- ness so secured, notice of sale by advertisement, sale, receipt of money, and the happening of any of the aforesaid events, whereby the sheriff may become successor as herein provided, shall be 'prima facie evidence of the truth of such statement or recital; and the said trustee shall receive the proceeds of said sale, out of which he shall pay, first, the cost and expen- ses of executing this trust, including compensation to the trustee for his services, and legal expenses to the attorney for his services; and next he shall apply the proceeds thereof, remaining over, to the payment of said debt and interest, and the premium and so much thereof as remains unpaid, and the remainder, if any, shall be paid to the said part. . . .of the first part or. . . .legal representatives. The said party of the third part may become the purchaser at the sale of said land, made by said as trustee, or any person acting in his stead as trustee, as aforesaid, just as if such sale were made by a trustee in whose trust said asso- ciation had no interest. In witness whereof, the said part,... of the first part, ha . hereunto set ... . hand .... and seal . . . . , this day and year first above written. Executed in the presence of [seal] [seal] [seal] « [seal] APPENDIX. 199 Form of Insurance Clause. The following insurance clause should be used. Under the ordinary "loss if any payable" clause, the rights of the asso- ciation may be jeopardized by some act of the mortgagor. Union Mortgage Clause. Loss, if any, payable to mortgagee or trustee, as hereinafter provided. It being hereby understood and agreed, that this insurance, as to the interest of the mortgagee or trustee, only herein, shall not be invalidated by any act or neglect of the mortgagor or owner of the property insured, nor by the occupation of the premises for purposes more hazardous than are permitted by the terms of this policy. Provided, that in case the mort- gagor or owner neglects or refuses to pay any premium due under this policy, then, on demand, the mortgagee or trustee shall pay the same. Provided, also, that the mortgagee or trustee shall notify this company of any change of ownership, or increase of hazard, which shall come to his, or their know- ledge, and shall have permission for such change of owner- ship or increase of hazard, duly endorsed on this Policy. And, provided, further, that every increase of hazard not permitted by the policy to the mortgagor or owner, shall be paid for by the mortgagee or trustee, on reasonable demand, and after demand made by this company upon, and refusal by the mort- gagor or owner to pay, according to the established schedule of rates. It is, however, understood that this company reserves the right to cancel this policy, as stipulated in the printed conditions in said policy; and also, to cancpl this agreement on giving ten days' notice of their intention to the trustee or mortgaiice named therein, and from and after the expiration of the said ten days, this agreement shall be null and void. It is further agreed, that in case of any other insurance upon the property hereby insured, then this com- pany shall not be liable under this policy for a greater pro]-»or- tion of any loss sustained than the sum hereby insured bears to the whole amount of insurance on said property, issued to 200 BUIl^DIiNG ASSOCIATIONS. or held by any party or parties having an insurable interest therein. It is also agreed, that whenever this company shall pay the mortgagee or trustee any sum for loss under this policy, and shall claim that as to the mortgagor or owner, no liability therefore existed, it shall at once, and to the extent of such payment, be legally subrogated to all the rights of the party to whom such payments shall be made, under any and all securities held by such party, for the payment of said debt. But such subrogation shall be in subordination to the claim of said party, for the balance of the debt so secured. Or said company may, as its option, pay the said mortgagee or trustee the whole debt so secured, with all the interest which may have accrued thereon, to the date of such payment, and shall thereupon receive from the party to whom such payment shall be made, an assignment and transfer of said debts, with all securities held by said parties for the payment thereof. To attach to Policy No of the Dated at this day of 189 ... , Agent. Form of Bond. Where the whole premium is deducted from the loan at the time of making it, this form may be used with the general form of mortgage hereinbefore given, identifying it in the body of such mortgage. Know all men by these presents, that of.... County State of held and firmly bound unto the Building and Loan Association, of a corporation duly organized and doing business under the laws of the State of in the sum of dollars, for the payment whereof, well and truly to be made, bind sel heirs, executors, adrainistrators and assigns, jointly and severally, hrmly by these presents. Witness hand and seal, this day of, A. D. 18.... APPENDIX. 201 The condition of the above obligation is sach, that whereas, on the day of A. D. 18 , the said being a member of said association, by bidding. . . .per cent premium on^ the par value of shares of the series of the capital stock of the said association, obtained jirecedence of an advanced loan, to the amount of dollars, and has, after deducting the premium bid as aforesaid, received dollars, it being the full value and in full payment of said shares of stock. Now, if the above obligor, heirs, executors, admin- istrators and assigns, or any of them, shall well and truly pay, or cause to be paid, unto the above obligee, its successor or assigns, the sum of dollars, said sum to be paid in monthly installments of dollars each, the first pay- ment or installment due and payable A. D, 18 . . . , and dollars monthly thereafter, being the monthly dues on said shares of stock, together with interest at the rate of per cent per annum, on said dollars, said interest due and payable in monthly installments of dollars and cents, the first of said interest installment, due and payable A. D. 18 said dues and interest payable on the first day of each month thereafter; said install- ments of principal and interest to be paid promptly, as they become due, during the existence of said association, or until €ach shareholder in the series thereof, has received on each of his shares one hundred dollars, including any pre- mium which he may have bid on his share or shares, and shall also pay all fines assessed on said stock, and all taxes, insur- ance or incumbrances of any kind, which may be imposed upon the property conveyed by mortgage deed to secure the above indebtedness, without delay, then the above obligation to be void, otherwise to remain in full force and virtue. Provided, however, and it is expressly agreed, if at any time default shall be made in the payment of said installments of principal money, when due, or of said interest, or of fines due imder the by-laws of said association, for the space of six 202 BUILDING ASSOCIATIONS. months after any payment thereof shall fall due, the said shares of stock of series, on which the said loan is obtained and herewitli transferred, may at any time thereafter be declared forfeited, as for non-payment of dues, and therefrom revert to said obligee, its successors or assigns, as forfeited stock, and the withdrawal value thereof, less one- eighth of said premium bid for said loan for each year, said series of stock shall have run, at the option of the obligee, its successors or assigns, be applied to the satisfaction of the above indebtedness, and in such case or cases, the whole principal debt aforesaid, and interest shall, at the option of the obligee, its successors or assigns, immediately become due and recoverable, and payment of said principal sura and all the interest thereon, as well as any contribution on said shares of stock, and all lines and taxes as aforesaid then due, may be enforced and recovered at once, anything herein con- tained to the contrary notwithstanding; and it is further understood and agreed, that all lines and penalties for non- payment of dues are agreed, assessed and liquidated damages for such non-payment of installments due on said stock. [seal.] , [SEAIi.] The following is the form of bond in use by associations in Pennsylvania : Know all men by these presents, that (hereinafter called the obligor), is held and firmly bound unto (herein- after called the obligees), in the sum of dollars, law- ful money of the United States of America, to be paid to the said obligees, their certain Attorney, successors or assigns. To which payment well and truly to be made, do bind heirs, executors and administrators, and every one of them, firmly by these presents. Sealed with seal dated the day of in the year of our Lord one thousand eight hundred and APPENDIX. 203 The condition of this oblii^^ation is such, that if the above bounded obligor heirs, executors and administrators, or any of thera, shall and do well and truly pay, or cause to be paid, unto the above-named obligees, their certain attorney, successors or assigns, the just sura of dollars, such as above said, at any time within one year from the date hereof, together with interest, for the same, and together with all fines imposed by the constitution and by-laws of the afore- said association, in like money, payable monthly, on the of each and every month hereafter, and shall also well and truly pay, or cause to be paid, unto the said obligees, their successors or assigns, the sum of . . . .dollars, on the said .... of each and every month hereafter, as and for the monthly contribution on share of the capital stock of the said obligees, now owned by the said obligor, without any fraud or further delay; and shall also deliver to the said obligees, their successors or assigns, on or before the day of of each and every year, receipts for all taxes of the current year, assessed upon the premises described in the accompanying indenture of mortgage. Provided, however, and it is hereby expressly agreed, that if at any time default shall be made in the payment of the said principal money when due, or of the said interest, or of the said fines, or the monthly contribution, on said stock, for the space of six months after any payment thereof shall fall due, or in such delivery to the said obligees, their successors or assigns, on or before the day of of each and every year, of such receipts for such taxes of the current year, upon the premises mortgaged, or if the said obligor shall not well and truly pay, or cause to be paid, the and taxes, on the premises particularly described in the mortgage accom- panying this obligation, when the same shall become due and payable, and also shall not well and truly pay, or cause to be paid, all and every sucli sum or sums as shall liereafter be assessed by any public authority upon the said principal debt or sum, or upon the interest thereof, then, and in such case, the whole principal debt aforesaid shall, at the option of the eaid obligees, their successors and assigns, immediately there- 204 BUILDING ASSOCIATIONS. upon become due, payable and recoverable, and payment to said principal sum, and all interest, and all fines, thereon, as well as any contribution on said share of stock then due, may be enforced and recovered at once, any thing here- in before contained to the contrary thereof notwithstanding. And it is hereby further agreed, that if the same, or any part thereof, has to be collected by process of law, that an attor- ney's fee of .... per cent shall be added to and collected as a part of the costs of such proceedings. And the said obli- gor, for heirs, executors, administrators and assigns, hereby expressly waive and relinquish unto the said obligees, their successors and assigns, all benefit that may accrue to by virtue of any and every law, made or to be made, to exempt the premises described in the indenture of the mortgage here- with given, or of any other premises or property whatever, from levy and sale under execution, or any part of the proceeds arising from the sale thereof, from the payment of the moneys hereby secured, or any part thereof, and the cost of such action and execution, then the above obligation to be void, or else to be and remain in full force and virtue. Sealed and delivered, ) in the presence of us, ) To Esquire, Attorney of the Court of Common Pleas, at in the County of in the State of . ■ or to any other Attorney, or to the Prothonotary of the said Court, or of any other Court, there or elsewhere. Whereas, in and by a certain obligation, bearing even date herewith, do ... . stand bound unto in the sum of lawful money of the United States of America, conditioned for the payment of the just sum of dollars, such as above- said, at any time within one year from the date thereof, to- gether with interest, for the same, and together with all fines imposed by the constitution and by-laws of the afore- said association, in like money, payable monthly, es. County of ) On this day of eighteen hundred and .... before me personally appeared who, I am satisfied, .. ..the mortgagor in the within mortgage named; and I haying first made known to the contents thereof, .... did acknowledge that signed, sealed and delivered the same as voluntary act and deed. And the said being by me privately examined, separate and apart from .... said husband did further acknowledge that signed, sealed and delivered the same as ... . voluntary act and deed, freely, without fear, threats or compulsion of said husband. Form of mortgage used by the Mutual Home and Savings Association, of Dayton, Ohio, which is the parent of a class of popular associations: Know all men by these presents, That in consideration of dollars, in hand paid, by the Mutual Home and Savings Association, of Dayton, Ohio, ha. . bargained and sold, and do .... hereby grant, bar- gain, sell and convey unto the said Mutual Home and Savings Association, its successors and assigns forever, the following premises, situated in the City of Dayton, County of Mont- gomery, in the State of Ohio, and described as follows: .... To have and to hold said premises, with the appurtenances, unto the said Mutual Home and Savings Association, its suc- cessors and assigns forever. And the said grantor. . for and heirs and assigns, do ... hereby covenant with the said Mutual Home and Savings Association, its successors and assigns, that . . he lawfully seized of the premises aforesaid, and that the premises are free and clear from all incumbrances whatsoever, and that he . . will forever 218 BUILDING ASSOCIATIONiJ. warrant and defend the same, with the appurtenances, nnto the said Mutual Home and Savings Association, its successors and assigns, against the lawful claims of all persons whomso- ever. Provided, nevertheless, and these presents are upon this condition: That, whereas, the said ha. . entered into contract, in writing, with said association, in the words and figures following, to wit: $ Dayton, Oliio, 189 . . Received of the Mutual Home and Savings Association, of Dayton, Ohio, dollars, as a loan on shares of stock No owned by in said association. ao-ree to pay to said association weekly, not less than dollars, which shall be applied as follows: First. To the payment of any fines or other assessments made against in pursuance of the by-laws of said associa- tion. Second. To the payment of the premium for precedence due on said loan, amounting to dollars per week. Third. To the payment of the interest due on said loan, amounting to per week. Fourth. The balance of said payments shall be credited as dues on said stock. Said payments shall be continued until the dues so credited on said stock, together with the dividends declared thereon, shall equal the amount loaned. Should .... fail for eight weeks to pay said weekly pay- ments, then the whole amount of said loan shall at once become due and payable. Now, if the said shall pay to said association, its successors or assigns, the said suras of money when due, as set forth in said contract, then these presents shall be void. APPENDIX. 219 In testimony whereof, tlie said ha. . hereunto set! , . . . . hand , . tliis day of 189 . . Executed in presence of State of Ohio, Montgomery County, ss: Before me, a Notary Public, within and for said county, personally appeared the above named and acknow- ledged the signing of the foregoing conveyance to be voluntary act and deed, for the uses and purposes therein expressed. "Witness ray hand and notarial seal, this day of A. b., 189.. Notary Public, Montgomery County, Ohio. Stock No Mortgage to Mutual Home and Savings Association, of Dayton, Ohio. Borrowed, $ Date, Received for record, at .... o'clock M. and recorded in book .... page .... Recorder of Montgomery County. Dayton, Ohio I hereby release this mortgage. President Mutual Home and Savings Associa- tion, of Dayton, Ohio. Co-operative Bank Mortgrag-e used in Massachu- setts. Know all men by these presents, that I , in consideration of dollars, paid by the Co- operative Bank, a corporation duly established by law, in , in the county of , and commonwealth of 220 BUILDING ASSOCIATIONS. Massachusetts, the receipt whereof is hereby acknowledged, do hereby give, grant, bargain, sell and convey unto the said corporation, its successors and assigns To have and to hold the granted premises, with all the privileges and appurtenances thereto belonging, to the said corporation, and its successors and assigns, to their own use and behoof for- ever. And hereby, for and heirs, execu- tors and administrators, covenant with the said grantee and its successors and assigns, that lawfully seized in fee- simple of the granted premises; that they are free from all in- cumbrances, that have good right to sell and convey the same as aforesaid, and that will and heirs, executors and administrators shall warrant and defend the same to said grantee and its successors and assigns forever, against the lawful claims and demands of all per- sons Provided, nevertheless, that whereas ha. . this day pledged and transferred to the said corporation shares of its capital stock, said shares being in the series as collateral security for the performance of the terms, covenants and conditions of this mortgage, and of the note hereinafter mentioned, upon which shares said sum of dollars has been advanced to by said corporation, now, there- fore if or heirs, executors, administrators, or assigns, shall pay unto the said corporation, its successors or assigns, the sum of monthly, at the stated meet- ino-s of said corporation, on the of each month here- after, being the amount of the monthly dues on said shares, and of the monthly interest and premium upon said loan or advance of dollars, for which said shares are pledged, and said note and mortgage given, together with all lines chargeable by the by-laws of said corporation, upon arrears of such payments, until said shares shall reach the ultimate value of two hundred dollars each, or if or heirs, executors, administrators or assigns, shall APPENDIX. 221 otherwise sooner pay nnto the said corporation, its successors or assigns, said sum of dollars, together with the said interest, premiums and fines as aforesaid, to the time of such payment, and, until such loan shall be paid, or cancelled by the ultimate value of said shares, if shall pay without charge to said corporation, all taxes and assessments levied or assessed on the granted premises, including those assessed upon said corporation's interest therein, as holder of this mort- gage, and, if said corporation's loans on mortgages of taxable real estate shall not at any time be exempt from a state tax on the amount of its monthly dues, if shall on demand pay unto said corporation such percentage on the debt hereby secured, as it shall from time to time be required to pay as such state tax, shall keep the buildings thereon insured against fire, in a sum not less than dollars, for the benefit of the grantee, its successors or assigns, at such insurance office as it or they shall approve, or, in default thereof, shall, on demand, pay to said corporation all such suras as it shall reasonably pay for such taxes, assessments and insurance, with interest, and shall not commit or suffer any strip or waste ot the granted premises, or any breach of any covenant herein contained, then this deed, as also a note of even date herewith, signed by whereby promise to pay to the grantee, or order, the said sums, at the times aforesaid, shall be void. But in case of non-payment of the aforesaid monthly dues, interest, premium for fines for the period of six months after any payment thereof shall be due, or upon any other default in the performance or observance of the foregoing condition, the grantee, or its successors or assigns, may sell the granted premises, or such portion thereof as may remain subject to this mortgage, in case of any partial release hereof, together with all improvements that may be thereon, and all benefit and equity of redemption of . . . .or . . . .representatives therein, at public auction, in said , first publishing a notice of the time and place of sale, once each week, for three consecu- tive weeks, in one or more newspapers published in said 222 BUILDING ASSOCIATIONS. , . . .and may convey the same by proper deed or deeds to the purchaser or purchasers absolutely, and in fee simple; and such sale shall forever bar and all persons claiming under from all right and interest in the granted premises, whether at law or in equity. And do hereby, for heirs and assigns, further covenant and agree with the grantee, its successors and assigns, that on such sale, and they will, upon request, exe- cute and deliver such further deeds and instruments as may be necessary or proper to confirm such sale, and to vest the title to the premises sold in the purchaser thereof, and will execute and deliver to the purchaser an assignment of all policies of insurance on the buildings upon the land covered by this mortgage. And out of the money arising from such sale, the grantee, or its successors or assigns, shall be entitled to retain all sums then secured by this deed, whether then or thereafter payable, including all costs, charges and expenses, incurred or sustained, by reason of any failure or default on the part of or of representatives to perform and fulfil the condition of this deed, rendering the surplus, if any, to or heirs or assigns. And it is agreed that the grantee, or its successors or assigns, or any person or persons in their behalf, may purchase at any sale made as aforesaid, and that no other purchaser shall be answerable for the application of the purchase money; and that until default in the performance of the condition of this deed, and heirs and assigns may hold and enjoy the granted premises and receive the rents and profits thereof. And for the consideration aforesaid, I, wife of the said do hereby release unto the said grantee, and its successors and assigns, all rights of or to both dower and homestead in the granted premises. APPENDIX. 223 In witness whereof, the said hereunto set hand and seal, this day of in the year one thousand eight hundred and Signed, sealed and delivered in presence of Commonwealth of Massachusetts ss 18 . . Then personally appeared the above named and acknowledo-ed the foregoing instrument to be free act and deed, before me, Justice of the peace, 18. ., at o'clock and minutes, M. Keceived and entered with Deeds, libra folio attest: , Kegister. 224 BUILDING ASSOCIATIONS. Form of Stock Register. Bj adding enough weeks downward to constitute a year, the stockholder's account with the association appears in compact form, and like columns may be increased to the right, next to the "Total" column, and the latter will prove the footings. If the accounts are to be cast up but once a year, this form may easily be adapted, by omitting the six months' summary, or, if the association declares no dividends, that much of the form may be omitted. This form is used by permission of Mr. L. G. Dynes, its inventor. M O) a> ^ .a a o o ^ ^ Balances. May Jun. July Auff Sep. Oct 7 14 21 28 4 11 18 25 2 9 16 2i 30 6 18 2'i 27 3 10 17 24 1 8 15 22 29 Totals, Book No. Ent. and Trans. Fees. NAME OF STOCKHOLDER. Address Cr. Dues. Prem Int. Fines and Disc'ts No. Shares Dr. (Loan) (Pay- ments) Totals. Balance, $ Dividend, Total, S ..percent. Current Term, S , . The association will only need to keep an expense accoont m addition to the above. APPENDIX. 225 oo u m o t-i T-l es o 1—1 O o Q t3 .2 l—i o ^ .2 <^ o S .2 o •X} -a p P 0-i c8 P2 3 ^ S§ P-1 t^ O H o .2 S 3 o 8 <1 a 03 o o 03 feX) '3 c3 e5 o 4il €&«&«§' Q Q s ^pio poof) !2i £ M ^ O o CO a 1 o, H O W ^ 15 3 O « o J 226 BUILDING ASSOCIATIONS. Form of Building Agreement. Articles of agreement. It is hereby mutually agreed, this . . day of ... . 189 . . by and between part . . of the fii-st part, and part.. of the second part, all of Marion County, State of Indiana, as follows, to wit: Part .... of the second part, for heirs, executors and administrators, hereby covenant .... and agree. ... to and with said part .... that .... will erect, construct and fully complete in a good, substantial and workmanlike manner, on or before the day of 189 . . for the consideration hereinafter named, the following described improvements upon the rea} estate described in the specitications hereto attached, to wit: in the manner, in all respects, set forth in the plans and specifications hereunto attached and made a part; that second party shall furnish, at his own expense, all the labor and material used in such erection, construction and comple- tion of said improvements, and will carry a builder's insurance risk on same while in progress; in consideration for all which the party of the first part hereby agrees to pay unto second party the sum of dollars, in the manner following, to wit: Provided, that second part .... shall have fully paid for all material and labor furnished to date of pay- ment, so that there shall not be a lien therefor on the said real estate; that second party shall execute a bond in the suhi of dollars, with sureties to the satisfaction of first party and mortgagee, conditioned to idemnify first party and mortgagee from loss bv reason of mechanics liens. "O o It is further mutually agreed by and between the partiea hereto, that the said plans and specifications shall co-operate; that is to say, that any work or works set forth in the plans, and not mentioned in the specifications, and vice versa, are to be executed as fully as though set forth in both the plans and specifications. That nothing shall be built, erected, charged and paid for as extras, until after all agreements in relation thereto have been APPENDIX. 227 first reduced to writing and signed by the parties hereto; that first party shall not be liable for any damage that shall occur to any part of said work and improvements and to any person or persons employed in or about said premises ; that second party .... shall pay unto first party .... the sura of dollars per day for each day the completion of said improvements shall be delayed beyond the date hereinbefore fixed for their completion; that first party. . . .shall have the right to control the location of closets, mantels, shelves, brackets, chandeliers, bracket lights, stove pipe holes in flues, and colors of paint, beyond those mentioned in the specifications; and that first party. . . .shall not be responsible for any material and labor used in the improvements aforesaid In witness of all which, the parties have hereunto sot their hands on the day and date hereinbefore written. First party. Second party. Form of Building Specifications, Specifications for improvements. Specifications for improve- ments on the following described real estate, situated in County, State of Excavation, a. Outside trenches. ...inches deep. b. Cellar by feet in size, and. . . .feet deep in the clear. Foundation, a. Quality of brick , inches in ground and inches above ground, inches thick; outside walls of cellar to be nine inches thick, and inside walls to be four inches thick, b. The studding shall rest upon tim- bers placed upon foundation of dimensions and constructed as follows: c. Yentilators of in foundation shall be used as follows: d. Piers will be used as follows: and of following dimensions: Joists, a. Quality, and kind of timber b. Dimensions of joist shall be by inches, placed inches from center to center, with rows of truss brido-- ing, and joists shall be accurately sized at the top. c. Second «_)28 BUILDING ASSOCIATIONS. story joists shall be .... by inches, placed inches from center to center, with .... rows of truss bridging, and accur- ately sized both at top and bottom, d. Joists shall be spiked with penny nails, and bridging nailed securely with penny nails, e. Studding shall be double at all corners and all openings. Studding", a. Quality and dimension of studding, b. How fastened at top. c. Kind of nails and how many used in spiiving studding, d. How far from center to^center. Rafters, a. Quality and dimensions of rafters, b. Eafters shall be placed -inches from center to center. c. Pitch shall be. . . . d. Rafters shall project inches ' outside of outer walls, and shall be finished as follows: Lining', a. Paper of quality, and fastened as. follows, b. Timber as follows and put on diagonally, in following manner, with penny nails in each stud- ding. Weatherboarding. a. Quality and kind of weather- boardino- shall be and securely nailed to each studding| with one. . . .penny nail ; free from windshakes, bad knots and placed. . . .inches to the weather, b. Corner boards shall be of lumber .... by inches, c. The finish around the. doors and windows shall be as follows: Porticoes, a. Shall be built, having turned columns resting upon iron stands, piers by inches; feet wide, and with roof, necessary brackets and scroll work, shall be built as follows: Roof. a. Sheathing shall be . . . .inches apart, nailed with penny nails in each rafter, and shall be of lumber des- cribed as follows, b. Shingles of ..quality, placed inches to weather, and nailed with two penny nails to each shingle, c. Comb boards of following kind and quality: APPENDIX. 229 Floors, a. Kind and quality of flooring shall be as fol- lows and each plank shall be nailed to each joist with . . . .penny nails. . Windows, a. Frames shall be of following description. b. Sash of following description will be used. c. Glass shall be of doable strength and of following dimensions fastened with tin points and well puttied, d. Weights, cords, pullies and locks will be put on all windows, except Doors, a outside doors, of ... . style and of fol- lowing size and description b inside doors of panels and of following size and description will be used. c. Transoms of following size, and hung on pivots, will be used over each door, (except closet doors), d. Hard- ware for doors will be of following kind and sizes, e. Bump- ers will be provided for each door. Plastering, a. Lath of quality shall be used. b. .... coats of brown mortar, made of lime, best hair and sharp sand, shall be put on with true surface and corners, b. One skim coat of white shall be put on the brown coat (when dry), with like accuracy of surface and corners. Finish, a. Kind and quality of lumber for inside finish shall be as follows: b. Style of finish shall be c. Baseboard shall be by inches, with moulding on top and quarter round on floor, d. Finishing shall be - ... by inches round each door and window, with moulding as follows e. Picture moulding shall be put in the following rooms: Closets, a. Where placed and dimensions, b. Doors of following kinds shall be used for each closet, to wit. c. Shelves shall be placed in each closet as follows, d. Closet hooks of best quality shall be placed in each closet. Pantry, a. Shelving, b. Bread box of following con- struction shall be provided, c. Other furnishings for pantry shall be as follows. 230 BUILDING ASSOCIATIONS. Staii'Avays. a. Location and kind of finish, b. Ban- isters shall be. c. Newel posts shall be. d. Landings. e. Manner of construction shall be. f. Stairway for cellar shall be constructed as follows: Plumbing'. Shall be put in as follows, and of best ma- terial and workmanship: Tinwork. Shall be as follows and of best quality of tin for long wear: Paint, a coats of best boiled linseed oil ^and best brands of lead, of color to suit owner, for outside, b coats of for all inside finish, after finish has been thoroughly sandpapered, except, c. Eoof, tinwork and comb boards shall be painted with two coats of paint. Flue. a. Shall be located as follows: b. Brick shall be of best hard burned where exposed to the weather, with foundation thereof resting on ground, starting inches below surface, well plastered on the inside, and provided with holes for stove pipe and best sheet iron thimbles and tin caps wherever directed by owner; all flues and chimneys to extent feet above roof, and well supplied with tin flashings, to' prevent leaks where they pierce the roof. Ventilators. Shall be made of ornamental scroll work . . . .by . . . .inches in size and placed as follows: Ornamental Scroll work shall be placed as follows and of following description: Outside steps at each outside door shall be constructed as follows: Outside door and stairway to cellar shall be constructed as follows: Fencinar. a. Picket, b. Tight boards, c. Paint. APPENDIX. 231 Well. a. Kind. b. Furnishings. Cistern, a. Size. b. Furnishings, c. Connection with down spout, d. Overflow pipe. Sink. a. Kind. b. Covering. Outbuilding's, a. Kind. b. Kind and quality of material to be used therein, c. Size. d. Foundation. e. Hoof. f. Paint, g. Vault shall be. .. .feet deep, and walled with whole brick, burned sufficiently hard not to crumble. Its location shall be Extras. Plans for buildings for which the foregoing specifications are made are as follows: Form of Indemnifying^ Bond Against Liens. Know all men by these presents, that we of Marion County, and State of Indiana, are held and firmly bound unto the association of Marion County, Indiana, in the sum of ....... .dollars, to be paid to said association, well and truly, we bind ourselves, our heirs, executors and admini- strators, firmly by these presents. Sealed with our seals and dated the day of A. D., 18 The conditions of this obligation are such, that whereas, the above bounden ha. . . .heretofore entered into a contract with the owner of certain real estate in County, Indiana, to make certain improvements thereon, which real estate is described as follows, to- wit And whereas, said association has agreed to lend the owner of said real estate S with which to make said improve- ments, such loan to be secured by a first mortgage upon said i-eal estate. Now, therefore, should said obligors, their heirs, executors, administrators, successors and assigns, construct and fully complete according to contract, said improvements, in all their 232 BUILDING ASSOCIATIONS. parts, in a manner satisfactory to the owner of said real estate, and to the board of directors of said association, and furnish and pay for all materials of every description used in improv- ino^ said real estate, and fully pay all salaries, wages, compen- sations and moneys, which are or hereafter may be due and owing to any and all employes and laborers, who have been, now are, or hereafter may be employed upon, about or in con- nection with said improvements, and keep and preserve said premises free from any liens for materials furnished, or work and labor done; or, in case any such lien or liens, be taken against said real estate, should said obligors cause each lien so taken, to be satisfied, removed, released and fully discharged, within thirty days from the filing of such lien, and hold and save said association harmless, by reason of such improvement of said real estate, or by reason of any loss, damage or injury grow- ing out of, or, directly or indirectly, resulting therefrom, so that said mortgage shall be and remain a first lien npon said real estate, then this obligation shall be void and of no effect; otherwise, it shall remain in full force. These obligors hereby agree that changes and additions, if any, in said contract for improvements, shall not operate to release them herefrom, but this bond shall apply to such addi- tions and changes, if any, to the same extent that it would apply were they in existence at this time. The said obligors hereby agree, jointly and severally, to pay said several sums, and to perform all the conditions of this bond and of said mortgage, and to pay ten per cent attorneys' fees, upon any sum which may be recovered upon this bond, all without any relief from valuation or appraisement laws. Signed and delivered in presence of ) [seal] [sp:al] . [seal] APPENDIX. 233 State of ) >6S. County of ) , being duly sworn upon oath says; that he is the person who signed the attached indemnifying bond as surety thereon; that he is the owner in hia own name and right, of unincumbered real estate, situated in County, State of Indiana, worth double the penalty of the attached bond, over and above all debts, liens and exemptions of law. Subscribed and sworn to before me, this day of ........A. D. 189.. .Notary Public. (Note. — An exemption as allowed by law should be exclusive of the sworn valuation. The surety should be worth double the penalty of bond. Write in ink.") Form of Contractor's Waiver of Liens. 189.. To the Association: In consideration of the loan of $ , made by you to on the following real estate in County, State of , to wit: .... I, as contractor, for making improvements on said real estate, agree to waive any claim or right I may have to take or hold any mechanic's lien on said real estate, or the building or build- ings to be placed thereon, and I agree to idemnify you against any lien for labor done or material furnished to make said improvements. State of .... County ' [ss. being duly sworn, on his oath says that the fol. lowing is a complete list of the persons who have performed any labor or furnished any material in making the improve- ments on the real estate belonging to and described 234 BUILDING ASSOCIATIONS. in the above agreement, and I authorize the Associa- tion to pay said persons, out of the loan made by from said association, the amounts due them severally, to th© extent of said loan: NAME. I WHAT FOR. | AMOUNT. I I Signature Subscribed and sworn to before me this day of 189.. N.R I authorize said Association to pay, out of a loan made by me from it, amounts due contractors, sub-con- tractors, laborers, or for material as per list furnished by. . . . as above. Witness Signature Form of Sub -contractor's Waiver. "We severally acknowledge the receipt of the amounts set opposite our respective names, for work done or material fur- nished for building, on lot County, State of being on street side, between and streets, for being property upon which the Association has made a loan of $ And we hereby certify that no part of the material furnished or work done was for or on any other property. And we here- by release all our rights to a mechanic's lien on said real' estate, or improvements thereon, for any amount now or here- after to become due. NAME. WHAT FOR. AMOUNT. RECEIPT. General form of Bond for Secretary. Know all men by these presents. That as principal and as surety, are held and firmly bound unto the APPENDIX. 235 Association, in the penal sum of dollars, to pay which thej bind themselves, their heirs, executors and administrators, firmly by these presents. The conditions of this obligation are such, as that, whereas, on the day of. .. .. . ...189. ., the said was duly elected secretary of Association aforesaid, by the directors thereof. Xow, therefore, if the said shall faithfully perform his duties as such secretary, during the term for which he was elected, and during any succeeding term, until his successor is duly elected and qualified, as such duties are now, or hereaf- ter may be imposed by the by-laws of said association, andl during such time shall faithfully and accurately account' for all moneys, books, notes, mortgages and other instru- ments of indebtedness, in favor of said association, and upon surrendering his said office, deliver to his successor in office, all money or other property of value in his hands, as such secretary, belonging to the said association, then this bond to be void and of no effect whatever; otherwise to be and remain in full force and effect in law. In witness whereof, we have hereunto affixed our hands andi seals, this day of A. D., 189.. , [seal.] . [skat..] , General form of Bond for Treasurer. Know all men by these presents, That as principal and as surety, are held and firmly bound unto the Association, in the penal sum of dollars, to pay which they bind themselves, their heirs, executors and administra- tors firmly by these presents. The conditions of this obligation are such, as that, whereas, on the day of 189 . . the said was duly elected,' treasurer of the said association. 236 BUILDING ASSOCIATIONS. TTow, therefore, if the said shall faithfully perform his duties as such treasurer, during the term for which he was elected, and for any succeeding term, until his successor is duly elected and qualified, as such duties are now, or hereafter may be imposed by the by-laws of said association, and during such time faithfully and accurately account for all moneys, books, papers and other property belonging to the said associa- tion in his hands as such treasurer, and upon the surrender- ing of his office, deliver to his successor all moneys and other property in his hands as such treasurer, then this bond to be void and of no effect whatever; otherwise to be and remain in full force and effect. In witness whereof, the said and have here- unto set their hands and seals, this day of A. D. 189.. [seal.] , . [seal.] UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. NOV -^ ■ UCLA L/:. 7 LIBRARY JUL 2 2001 rrnjTT— F- .rt- .4, -;:--^aMji