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Provision in By-laws for Withdrawing. In the absence of stat. utory provisions, the association may fix the terms on which the members may withdraw, and a provision for withdrawals by stockholders, and for their receiving the dues paid, with interest, less certain deductions, but that no member should withdraw who had taken a loan, until it was fully paid, unless by consent of the directors, is valid and binding. (McNamara v. Oakland etc. Assn., 131 Cal. 336, 63 Pac. 670.)
MATURITY OF STOCK.
Sec. 636, C. C. When the stock in any series shall have reached its matured value, payment of dues thereon shall cease, and all of the stockholders in such series who have borrowed from the association shall be entitled to have their securities returned to them, and a satisfaction of the mortgages made by them to the association; and the holders of free shares of stock in such series shall be paid out of the funds of the association the matured value thereof, with such rate of interest as shall be determined by the by-laws, from the time the board of directors shall declare such share to have matured until paid; but at no time shall more than one-third of the receipts of the association be applicable to the payment of matured shares, without the consent of the board of directors. The order of the payment of the matured shares shall be determined by the by-laws. En. Stats. 1891, 254.
Maturity of Debt and of Stock.- Where the by-laws contemplate an uncertain maturity for its shares, and there was no agreement that stock, pledged as security for a loan upon a mortgage to share. holder for a fixed period, shall mature at the maturity of the debt, the borrower is not entitled to have the mortgage canceled at its maturity, if the stock is not then matured; but if no further pay. ments are made, the association is entitled to foreclose the mortgage, and sell the pledged shares to pay the matured debt. (McNamara v. Oakland etc. Assn., 131 Cal. 336, 63 Pac. 670.)
LOANS AND INSTALLMENTS.
Sec. 637, C. C. The moneys in the hands of the treasurer, and such sums as may be borrowed by the corporation for the purpose, shall be loaned out in open meeting to the member who shall bid the highest premium, or may be loaned at such premium as may be fixed from time to time, by the board of directors; and the premium may be deducted from the amount of the loan, or such proportion may be deducted as the bylaws shall provide, and in that case the balance of said premium shall be payable in such installments as the by-laws shall determine; provided, however, that where the premium is payable in installments, the number of installments into which the same is divided shall be uniformly applicable to all loans made by the corporation, and shall be payable at the times and in the manner as provided in the by-laws; and provided further, that in no case shall the amount loaned exceed the matured value of the shares pledged to secure the loan. En. Stats. 1891, 254.
Bay City Building etc. Assn. v. Broad, 136 Cal. 526, 69 Pac. 225.
Money Lent to Other Than Member.—Whether a building and loan association has authority to loan money upon mortgage to one who was not a member of the corporation is a question which cannot be raised collaterally by a mortgagor, who has dealt with the corporation, and received a sufficient consideration for his note and mort. gage. (Bay City etc. Assn. v. Broad, 136 Cal. 525, 69 Pac. 225.)
Rights of Mortgagor.-A mortgagor who has violated his contract to pay up his pledged shares in full satisfaction of the mortgage, has an equitable right to an accounting of the affairs of the association, and to be credited with the sum paid, and charged with the sum to be paid at the winding up of his series; but he is only entitled in equity, to be credited on the mortgage debt with the value of the pledged shares when sold in open market. (McNamara v. Oakland etc. Assn., 131 Cal. 336, 63 Pac. 670.)
And when such mortgagor pledges his shares in a building and loan association to the association to secure a loan, he occupies the dual relation to the corporation of borrower and stockholder, each of which is distinct from the other; and payments made on the collateral shares pledged are not payments on account of the debt they secured. (McNamrara v. Oakland etc. Assn., 131 Cal. 336, 63 Pac. 670.)
A stockholder who borrowed under by-laws providing for a deduction of premiums from the principal of the loan, and who, after such deduction, made payments on the loan, and knew the effect of his contract, cannot insist that he would not have signed the note had he known the facts, and, after paying the premium required of borrowers, is estopped to complain of any violation of the by-laws in the loaning of the money to him, and cannot urge in an action to foreclose his mortgage, that the association suffered by such violation of the by-laws. (McNamara v. Oakland etc. Assn., 131 Cal. 336, 63 Pac. 670.)
And in the absence of a by-law giving the right, the mortgagor cannot offset his payments and earnings against a mortgage debt due the association on a loan. (McNamara v. Oakland etc. Assn., 131 Cal. 336, 63 Pac. 670.)
Provisions in a mortgage given to secure a loan by a building and loan association for the application to the loan of the cash surrender value of the shares at the option of the association are for the benefit of the association, and the mortgagor has no right to demand such application, and cannot compel the association to make it. (McNamara v. Oakland etc. Assn., 131 Cal. 336, 63 Pac. 670.)
RATE OF INTEREST-SECURITY.
Sec. 638, C. C. The rate of interest on all loans may be fixed by the by-laws; but in case the by-laws fail to fix the rate, then it shall be fixed from time to time by the board of directors. For every loan made, a note or obligation secured by a first mortgage or deed of trust upon unencumbered real estate shall he given, accompanied by a transfer and pledge to the association of at least one share of stock as collateral security for the repayment of the loan, or in lieu of a mortgage or deed of trust there may be pledged and transferred to the association for the payment of the loan, free shares, the withdrawal value of which under the by-laws at the time of such borrowing shall exceed the amount borrowed and interest thereon for six months. At the discretion of the board of directors the borrower may repay the loan and all arrears and interest and fines thereon at any time upon surrender of the shares pledged for the loan. En. Stats. 1891, 255. Amd. 1897, 30; 1900-01, 268.
The amendment of 1897 had, instead of 'of at least one share of stock," the words of the shares borrowed upon." The original is the same as the amended section of 1897, except that it did not provide for a deed of trust as security.
By-law Affecting Interest.–Certain by-laws assuming to impose penalties for failure to meet installments, when due, construed and held not to affect the contract of loan. (Occidental B. & L. Assn. V. Sullivan, 62 Cal. 394. Note citations: 54 . Am. St. Rep. 314; 69 Am. Dec. 153.)
FORFEITURE-ARREARS IN PAYMENTS.
Sec. 639, C. C. Whenever any member shall be six months in arrears in the payment of his dues upon free shares, the secretary shall give him notice thereof, in writing, and a statement of his arrearages, by mailing the same to him at the last postoffice address given by him to the association, and if he shall not pay the same within two months thereafter, the board of directors may, at their option, declare his shares forfeited; and at the time of such forfeiture, the withdrawal value thereof shall be determined and stated, and the defaulting member shall be entitled to withdraw the same without interest, upon such notice as shall be required of a withdrawing shareholder. Whenever a borrowing member shall be six months in arrears in the payment of his dues, or interest, or premium, the whole loan shall become due at the option of the board of directors; and they may proceed to enforce collection upon the securities held by the association. The withdrawal value, at the time of the commencement of the action, of all shares pledged as collateral security for the loan, shall be applied to the payment of the loan, and said shares, from that time, shall be deemed surrendered to the association. En. March 21, 1872. Amd. 1873-74, 217. Rep. 1891, 252. En. Stats. 1891, 255.
By section 1 of the act of March 31, 1891, page 252, sections 639647, inclusive, of the Civil Code, were repealed with the proviso that so far as said sections relate to and govern building and loan associations, heretofore incorporated and doing business under the Civil Code, the said sections shall continue in full force and validity. The old sections 639-647 were drawn mainly from the homestead act of 1861, page 567, and provided for “land and building corporations," and not for building and loan societies, as now provided in this title of the code.
The old section 639 is as follows: “Corporations organized for the erection of buildings and making other improvements on real property may raise funds in shares not exceeding two hundred dollars each, payable in periodical installments. Such bodies are known as land and building corporations, and may be organized with or without a capital stock. (In effect July 1, 1874.]”
The original section, instead of "for the erection of buildings and making other improvements on real property," had the words "under subdivision eleven of section 286."
Underhill v. Santa Barbara etc. Co., 93 Cal. 306, 28 Pac. 1049; Vercoutere v. Golden State L. Co., 116 Cal. 414, 48 Pac. 375; MeNamara v. Oakland etc. Assn., 131 Cal. 341, 63 Pac. 670.
With or without Capital Stock.—Building and loan corporations may be formed with or without capital stock, and may raise funds in shares not exceeding two hundred dollars each, payable in periodical installments. (McNamara v. Oakland etc. Assn., 131 Cal. 341, 63 Pac. 670.)
Investment Company.-A corporation organized for the purpose of receiving payments of subscription to its stock in installments to be invested in lands, and to deal in, improve, buy and sell real property, is not incorporated under section 639, Civil Code, relating to corporations for the erection of buildings and other improvements on real estate; but is incorporated under the general provisions of title I, part IV of the Civil Code. (Vercoutere v. Land Co., 116 Cal. 410, 48 Pac. 375.)
PURCHASE OF REAL ESTATE.
Sec. 640, C. C. Any such association may purchase at sale, public or private, any real estate upon which it may have a mortgage, judgment, lien, or other encumbrance, or in which it may have an interest; and may sell, convey, lease, or mortgage the same, at pleasure, to any person or persons. En. March 21, 1872. Rep. 1891, 252. En. Stats. 1891, 255.
See sec. 639, supra. The old section 640 is as follows: “Any such corporation may borrow money for the purpose of carrying out its objects, and may give as security therefor its shares or mortgage upon its real estate."