Building Associations

Co-operative associations, usually incorporated, established for the purpose of accumulating and loaning money to their members upon real estate security. It is usual for the members to make monthly payments upon each share of stock, and for those who borrow money from the association to make such payments in addition to interest on the sum borrowed. When the stock, by successive payments and the accumulation of interest, has reached par, the mortgages given by borrowing members are cancelled, and the non-borrowing members receive in cash the par of their stock. See Endlich, Build. Assoc; Wrigl. Build. Assoc. The general design of such an association is the accumulation from fixed periodical contributions of its shareholders and from the profits derived from the investment of the same, of a fund to be applied from time to time in accommodating such shareholders with loans, to enable them to acquire and improve real estate by building thereon; the conditions of the loan being such that the liability incurred therefor may be gradually extinguished by the borrower's periodical contributions upon his stock, so that when the latter shall be fully paid up the amount paid shall be sufficient to cancel the indebtedness; State v. Loan Ass'n, 45 Minn. 154, 47 N. W. 540, 10 L. R. A. 752. It differs from an ordinary corporation among other ways in the fact that in an ordinary business corporation stock is subscribed and either paid for at the time, or if partly paid for it becomes the property of the subscriber subject to future calls, while in a building association the stock subscriber is not the out and out owner of the stock from the beginning. He pays thereon a monthly payment, and, when these monthly payments, with his increment of gains accrued, equal the par value of the share of stock he is entitled to receive that amount. If, in the meantime, he has borrowed on his stock, it by pledge or operation of the loan remains the property or quasi property of the corporation, and the loan is returned by the payment of interest and stock dues, penalties, etc., the repayment of the loan culminating at the same time the stock itself matures, at which time, in theory, the corporation, or a given series or issue of its stock, is liquitheir loans cancelled; Cobe v. Lovan, 193 Mo. 235, 92 S. W. 93, 4 L. R. A. (N. S.) 439, 112 Am. St. Rep. 480. That it has power to borrow money to pay Its stockholders when their stock reaches its par value is held in North Hudson Mut. Bldg. & Loan Ass'n v. Bank, 79 Wis. 31, 47 X. W. 300, 11 L. R. A. 845; that such power is implied when no statute denies it is held in Bohn v. Bldg. & Loan Ass'n, 135 la. 140. 112 N. W. 199, 124 Am. St. Rep. 263; Marion Trust Co. v. Inv. Co., 27 Ind. App. 451, 61 N. E. 688, 87 Am. St. Rep. 257. Other cases hold that a loan for the purpose of paying withdrawing members is ultra vires and void in the absence of an express borrowing power in the association; 22 Ch. D. 61; Standard Savings & Loan Ass'n v. Aldrich, 163 Fed. 216, 89 C. C. A. 646, 20 L. R. A. (N. S.) 393. It has no power to transfer to another association the contract of a borrowing stockholder; Thomp. Bldg. & Loan Ass'n (2d ed.) 286; Barton v. Loan & Bldg. Ass'n, 114 Ind. 226, 16 N. E. 486, 5 Am. St. Rep. 608; Lovelace v. Pratt, 163 Mo. 70, 63 S. W. 383. That it has such power in the absence of statutory prohibitions, is held in Bowlby v. Kline, 28 Ind. App. 659, 63 N. E. 723; Quein v. Smith, 108 Pa. 325. In case of an advance by one loan association to take up a loan in another upon stock which has partly matured, the net amount of the loan is the sum still due, and not the face value of the loan, although the latter amount is charged on the books of the association and a credit as of an advance payment thereon given for the withdrawal value of the stock in the other association; Butson v. Sav. & Trust Co., 129 la. 370, 105 N. W. 645, 4 L. R. A. (N. S.) 98, 113 Am. St. Rep. 463. One loaning money to a building association to satisfy the claims of withdrawing members, taking an assignment of mortgages of borrowing members as security, cannot hold the mortgages against the claims of a receiver of the association, since he is charged with knowledge of the want of power of the association to make the assignment; Staudard Savings & Loan Ass'n v. Aldrich, 163 Fed. 216, S9 C. C. A. 646, 20 L. R. A. (N. S.) 393. A statute authorizing such associations to retire stock out of a portion of its current receipts, was held not to confer any power to give its notes to retiring stockholders; Appeal of Powell, 93 Mo. App. 296. Such an association may stipulate in a contract of loan for the payment of a monthly premium limited to a certain number of payments; Burkheimer v. Bldg. & Loan Ass'n, 59 W. Va. 209, 53 S. E. 372, 4 L. R. A. (N. S.) 1047. When its articles have been amended to conform to a statute providing for lower deny its benefits to members who have borrowed before the act was passed on the ground that the provisions of the amended articles' do not refer to pre-existing contracts; St. John v. Bldg. & Loan Ass'n, 136 la. 448, 113 N. W. 863, 15 L. R. A. (N. S.) 503. An absolute promise to mature its shares in a specified time is not changed to a conditional one dependent upon the success of the enterprise, by the shareholder's a ment, as expressed in the certificate of stock, to pay a specified monthly installment on each share until it matures or is withdrawn, and the provision of the by-laws accepted by him, that such installments shall be paid until each share is fully paid; Eastern Building & Loan Ass'n v. Williamson, 189 U. S. 122, 23 Sup. Ct. 527, 47 L. Ed. 735, following Vought v. Building & Loan Ass'n, 172 N. Y. 508, 65 N. E. 496, 92 Am. St. Rep. 761, and affirming Williamson v. Building & Loan Ass'n, 62 S. C. 390, 38 S. E. 616, 100S. The ground that such a promise on the part of the association was ultra vires was held not available where the shareholder had fully performed his part of the contract; Assets Realization Co. v. Heiden, 215 111. 9, 74 N. E. 56; Eastern Building & Loan Ass'n v. Williamson, 189 U. S. 122, 23 Sup. Ct. 527, 47 L. Ed. 735; Floyd-Jones v. Anderson, 30 Mont 351, 76 Pac. 751; Leahy v. Building & Loan Ass'n, 100 Wis. 555, 76 N. W. 625, 69 Am. St Rep. 945; Hammerquist v. Savings & Loan Co., 15 S. D. 70, S7 N. W. 524. But it has been held, where authority to issue stock having a fixed period of maturity was not expressly given by statute or by the articles or by-laws of the association, tht. ground of ultra vires may be set up by the association; O'Malley v. Building, Loan & Savings Ass'n, 92 Hun 572, 36 N. Y. Supp. 1016; Mc Kean v. Building & Loan Ass'n, 10 Pa. Dist R. 197; and to the same effect King v. Building, Loan & Inv. Union, 170 111. 135, 48 N. E. 677; Schell v. Loan & Inv. Ass'n, 150 Mo. 103, 51 S. W. 406. A stockholder who actively or passively concurs in the management of the affairs of a building association must bear his share of the losses during his membership resulting from such management; Browne v. Sanders, 20 D. C. 455. In considering the question of usury in a loan from a building association, payments made by the borrower as dues are not to be considered as interest, as such payments are made in order to acquire an interest in the property of the association and not for the use of money; Tilley v. Building & Loan Ass'n,."!_' led. 618; a premium bid for a loan cannot be allowed as a cloak for usury; International Building & Loan Ass'n v. Biering, 86 Tex. 476, 25 S. W. 622, 26 S. W. 39. Fines imposed for default iu payment of closure of a mortgage given to secure payment of an amount borrowed, unless it has been agreed that this may be done; Bowen v. Building & Loan Ass'n, 51 N. J. Eq. 272, 28 Atl. 67.