Opinion of the Court.

300 U.S.

Complementary to that section is § 8 of the Act (12 U. S. C. $ 733), which regulates the relation between the association and its members. Upon applying for a loan, the applicant "shall subscribe for shares of stock in such farm loan association to an amount equal to 5 per centum of the face of the desired loan,” the subscription at his election to be paid out of the proceeds, and the stock to be held by the association as collateral security. "Said capital stock shall be paid off at par and retired upon full payment of said loan.” Ibid.

These provisions for retirement, despite their apparent breadth, are not to be extended to a situation such as the one before us here, and this for two reasons.

In the first place, $ 8 of the statute, as already pointed out, is complementary to § 7. We are to read the two together. The association is not to retire its own shares and repay to the subscriber the amount of his subscription until the land bank has retired the corresponding shares of bank stock subscribed for by the association, and has paid back to the association the par value thereof. Only thus can the association be put in funds wherewith to make payment to its own subscribers. The record makes it plain, however, that this indispensable condition has never been fulfilled. The bank refuses to retire the

from the Federal land bank of its district it shall subscribe for capital stock' of said land bank to the amount of 5 per centum of such loan, such subscription to be paid in cash upon the granting of the loan by said land bank. Such capital stock shall be held by said land bank as collateral security for the payment of said loan, but said association shall be paid any dividends accruing and payable on said capital stock while it is outstanding. Such stock may, in the discretion of the directors, and with the approval of the Farm Credit Administration, be paid off at par and retired, and it shall be so paid off and retired upon full payment of the mortgage loan. In such case the national farm loan association shall pay off at par and retire the corresponding shares of its stock which were issued when said land bank stock was issued.” (12 U.S. C. $ 721.)

shares of bank stock subscribed for by the association upon the loan to the respondent, or to refund the subscriptions wholly or in part. The scheme of the statute would be fatally disrupted if the association could be held when the bank refused to pay.

In the second place, neither the bank nor the association is under a duty to retire stock when the association is insolvent, and thus to give to the withdrawing member through the return of his subscription a preference over others. The statute is misread if the sentences regulating withdrawal are taken out of the setting of a coöperative scheme and viewed in isolation. Under the law as it stood when respondent became a member, the shareholders were subjected to a personal liability for all the contracts, debts, and engagements of the association “to the extent of the amount of stock owned by them at the par value thereof, in addition to the amount paid in and represented by their shares." $ 9; 12 U.S. C. 744. The association is already in default in the payment of its mortgage debts, and already its capital is impaired. In such circumstances, to return to respondent the amount paid in and represented by his shares would frustrate the statutory mandate that the amount so paid in shall constitute a fund for the benefit of creditors to be supplemented in case of need by personal liability for as much more as the investment. Indeed, altogether apart from any pledge of personal liability, the whole structure of the association is built upon the implication of equal rights and duties on the part of the coöperating members. To permit a member to withdraw when the association is insolvent would be to cast upon his fellow members the responsibility for defaults for which all should answer ratably in proportion to their interests. To guard against that inequity the statute makes it clear that shares in the association shall not be subject to retirement until the corresponding subscriptions to the land bank have been

Opinion of the Court.

300 U.S.

canceled and refunded. We are not required to determine whether a member of an association will have rights enforcible against the bank when the association has been wound up in accordance with the federal statute. Cf. § 29; 12 U. S. C. $ 966. No such question is before us. Enough for present purposes that in the existing situation, with insolvency conceded, the shares of the association are not subject to withdrawal.

The conclusion thus arrived at is in accord with well considered opinions in North Dakota and Arkansas where the same question was involved. Byrne v. Federal Land Bank, supra; Western Clay National Farm Loan Assn. v. Lilly, 189 Ark. 1004; 76 S. W. (2d) 55. It has the support of persuasive analogies in the law of building and loan associations, which have much in common with farm loan associations incorporated by act of Congress. The settled rule is that the shares of building and loan associations are not subject to retirement when the association is insolvent, and that any refund made at such a time may be reclaimed by a receiver. Towle v. American Bldg., L. & 1. Society, 61 Fed. 446; Sullivan v. Stucky, 86 Fed. 491, 493; Coltrane v. Blake, 113 Fed. 785; Aldrich v. Gray, 147 Fed. 453, 456; Christian's Appeal, 102 Pa. 184; Colin v. Wellford, 102 Va. 581; 46 S. E. 780; cf. Fidelity Savings & Loan Assn. V. Burnet, 62 App. D. C. 131; 65 F. (2d) 477, 479, 481.

In holding that a judgment for the par value of the shares is inconsistent with the federal statute and impliedly forbidden, we cut the ground away from the auxiliary receivership, which must fall with the judgment it was intended to enforce. To this we add, however, that a national farm loan association is an instrumentality the federal government; that the time and manner of liquidation are governed by the federal statute; and that jurisdiction does not reside in the tribunals of a state to wind up the business of this governmental agency

either by a receivership or otherwise. 12 U. S. C. &$ 931,

, 961; Federal Land Bank v. Priddy, supra, pp. 231, 234; Cook County National Bank v. United States, 107 U. S. 445, 448; Easton v. Iowa, 188 U. S. 220, 233; Jennings v. U. S. F. & G. Co., 294 U. S. 216, 226; Brusselback v. Chicago Joint Stock Land Bank, 69 F. (2d) 598; Partridge v. St. Louis Joint Stock Land Bank, 76 F. (2d) 237; Boyd v. Schneider, 131 Fed. 223, 227.

Whether the respondent may vote upon his stock, after his mortgage has been paid in full, until the shares have been redeemed, and whether he has a remedy to compel the Farm Credit Administration to liquidate the business promptly, are questions that have been considered in the briefs, but that do not call for answer upon the record now before us.

The decree should be reversed and the cause remanded to the Court of Appeals of the State of Ohio for further proceedings not inconsistent with this opinion.

Reversed.

AMERICAN LIFE INSURANCE CO. v. REESE

SMITH STEWART ET AL.*

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE

TENTH CIRCUIT,

No. 440. Argued January 15, 1937.-Decided February 1, 1937.

1. Fraid in the procurement of insurance is provable as a defense

in an action at law upon the policy. P. 212. 2. A "contest," within the purview of a provision of a life insur

ance policy that it shall be incontestable after a period defined, has generally been held to mean a present contest in a court, not a notice of repudiation or of a contest to be waged thereafter.

P. 212. 3. No action at law having been brought on the policy, an insurer

whose attack upon the ground of fraud is endangered by the running of the time limited by the policy for contest may sue in equity for cancelation. P. 212.

Argument for Petitioner.

300 U.S.

In the present cases the period allowed for contest was two years from the date of the two policies. The Insurance Company's suits for cancelation were brought when six months and

ten days of that period had passed. 4. Where equity can give relief, plaintiff ought not to be compelled

to speculate upon his chance of obtaining relief at law, or to incur the danger that witnesses may disappear and evidence be

lost if he waits to be sued by his antagonist. P. 213. 5. A remedy at law does not exclude one in equity unless it is

equally prompt and certain and in other ways efficient. P. 214. 6. A remedy at law is not adequate if its adequacy depends upon

the will of the opposing party. P. 214. 7. Equitable jurisdiction existing at the filing of the bill is not de

stroyed by the subsequent availability of an adequate legal remedy. P. 215.

In these cases the equity jurisdiction which attached on the filing of the bills by the Insurance Company, was not lost when actions on the policies were brought in the same court; though the

court, if requested, might have tried the law suits first. 80 F. (20) 600; 85 id. 791, reversed.

CERTIORARI, 299 U. S. 536, to review the reversal of decrees for the cancelation and surrender of policies of life insurance.

Mr. William C. Michaels, with whom Messrs. Earle W. Evans and Joseph G. Carey were on the brief, for petitioner.

Cancellation of instruments procured by fraud is a wellsettled field of equity jurisdiction. The incontestable clause required contest in court to preserve petitioner's rights, and no law action was pending at the time the bills were filed in which contest could be made by answer. These facts demonstrate that petitioner did not have any remedy at law, adequate or otherwise, and presented a "special circumstance" authorizing petitioner to bring its

* Together with No. 441, American Life Insurance Co. v. Ora Inez Stewart et al. Certiorari to the Circuit Court of Appeals for the Tenth Circuit.