Ohio ex rel. Atty.-Gen. v. Greenville Building, etc., Association. comes and gives the court here at the December term thereof, 1873, to understand and be informed that the defendant, the Greenville Building and Saving Association, is, and since April, 1869, has been an incorporated company of said state, formed and organized under the act of the general assembly thereof, entled "an act to enable associations of persons to raise funds to be loaned among their members for building homesteads and for other purposes, and to become a body corporate;" and that it has continuously hitherto since said date, within said state, to wit, at the county of Darke, offended against the laws of the state, misused its corporate authority, franchises, and privileges, and assumed franchises and privileges not granted to it, and especially in the following particulars and matters, to wit: 1. It has unlawfully allowed its members to hold more than twenty shares of stock each in their own right, and it still doth the like. 2. It has unlawfully used its funds in buying orders and bonds and in discounting notes and mortgage securities and commercial paper, in doing a general banking business, and in loaning its funds to persons other than its members and depositors, by discounting their notes, orders, and se curities, and it still doth the like. 3. It has unlawfully loaned its funds to others than its members and depositors, and charged and received on such loans usurious rates of interest, and it still doth the like. 4. It has unlawfully refused and declined to loan its funds to its members for use in building homesteads, and for other purposes, and it still doth the like. All which things the defendant will continue to do unless prevented by the judgment of this court. Wherefore the plaintiff prays the process and judgment of the court in the premises, and for all proper relief. JOHN LITTLE, Attorney-General. To which the respondent pleads : 1. That it is not true that it has unlawfully exceeded the powers and franchises conferred on it by law, nor is it true Ohio ex rel. Atty.-Gen. v. Greenville Building, etc., Association. that it has assumed or claims any right or privileges not so conferred. 2. That it is not true that it permits any of its members to hold more than twenty (20) shares of its stock, nor that it claims any right so to do. 3. That it is not true that it has exercised, or that it claims to exercise banking privileges, and it says that the loans made by it, and the bonds, etc., purchased have been merely temporary investments of surplus money, and that it has long since ceased to make any such loans, purchases, or discounts, or any such investments. 4. That it is not true that said defendant corporation has in the past, or does now, refuse or decline to loan its funds to its members; but, on the contrary, says that it is now and always has been ready to loan to its members, in accordance with the laws of the land and the rules and regulations adopted for its government by the members of said association. Wherefore, defendant prays judgment; that said information be dismissed, and that it go hence, etc. The conclusions of fact at which the court has arrived from the testimony appear in the opinion of the court. Charles Calkins, with whom was A. T. Bodle, for the relator. Knox & Sater, for defendant. GILMORE, J. The information herein is filed by the attorney-general on his own relation, in the name of the state, under section 9 of the attorney-general act (1 S. & C. 89). It is not charged in terms that the defendant has done or committed acts which amount to a surrender or forfeiture of its corporate rights, privileges, and franchises; nor is a judgment of ouster from all its corporate rights, privileges, and franchises expressly demanded. The general charge is, that the defendant has in the past, and does now, unlawfully assume and usurp certain franchises and privileges Ohio ex rel. Atty.-Gen. v. Greenville Building, etc., Association. not conferred upon it by law, and has and does exceed the powers conferred upon it by law. Under this general charge there are several specifications of matters particularly complained of, and separate pleas have been filed to each specification. By these our inquiries will be guided, and they will be considered and disposed of in their order. The first specification is that the corporation (defendant) unlawfully allows certain of its members to hold in their own right, respectively, more than twenty shares of its stock. The plea to this specification is (1), a denial of the fact; and (2) a disclaimer of the right to allow to its members the privilege named. The inhibition in this respect is found in the second proviso of the 2d section of the act under which the defendant is incorporated (S. & S. 194, 195), and is as follows: "No person shall hold more than twenty shares in any such association in his own right." This provision is nowhere expressly or impliedly qualified in this or any other act relating to the subject. This issue of fact is found for the state upon the testimony of the secretary of the association, who says from April, 1872, to March, 1875, Frank McWhinney was the owner in his own right of twenty-four shares of stock that stood in his own name on the books of the association. It appears that a portion of this stock was obtained by McWhinney in connection with the purchase of certain real estate from another member of the association, who had taken a loan on the stock, and secured it by mortgage on the premises purchased, and that the stock was transferred to him by the mortgagor in performance of a part of the contract of purchase. It is assumed in argument that the fact of acquiring the additional stock in connection with the purchase of real estate, rendered the stock transaction unobjectionable, or at least excusable. This is a mistake. The corporation had nothing to do with the real estate contract between its members, and could not control it. It could, however, have controlled the Ohio ex rel. Atty.-Gen. v. Greenville Building, etc., Association. transfer of stock upon its books, and should have refused to allow any member to acquire and hold in his own right stock in excess of the number of shares limited by law. It also further appears from the testimony of the secretary that the "I. O. O. Fellows," which means, as we understand it, a lodge of the Independent Order of Odd Fellows, is the owner of thirty shares of stock in its own right, upon which it has taken a loan for the full sum of $6,000, less the premium paid. This, as to the excess over twenty shares, is clearly illegal and unauthorized. This issue of fact being found for the state, and it further appearing that in the latter instance the defendant is still offending, its disclaimer in this respect will not be heeded. The second specification charges that the corporation has used and does now unlawfully use its moneys and funds (1) in buying orders and bonds and in discounting notes, mortgage securities, and commercial paper; (2) in doing a general banking business with its funds; and (3) that it had been and is now loaning its funds to persons other than its members and depositors, and discounting notes, orders, and securities for such other persons. 66 The plea to this specification is (1) a denial that it has exercised banking privileges; (2) a disclaimer of the right to do so; and (3) that the loans made by it and the bonds, etc., purchased have been merely temporary investments of surplus money; and that it has long since ceased to make any such loans, purchases, or discounts, or any such investments." This plea does not deny that the defendant had been unlawfully using its funds as charged in this specification, except the allegations as to its having been doing a general banking business; and it is evasive in this, that, while it says that it has "long since ceased to make any such loans, purchases, or discounts," it does not disclaim the right and authority to do so. The only issue, therefore, that is made on this specification, is upon the charge of doing a general banking business. Upon the testimony this issue is found for the defendant. Ohio ex rel. Atty.-Gen. v. Greenville Building, etc., Association. It is shown that the great bulk of its money has been. used in making loans to members upon their stock in the manner contemplated by the law under which the association is organized; and the unauthorized acts mentioned below are not of such a character as to render it obnoxious to the charge of doing a general banking business. The matters charged as unlawful, in the first and third subdivisions of this specification, may be considered and disposed of together. The testimony shows that the corporation, in the past, has been loaning its money to members, depositors, and persons other than members or depositors, upon their promissory notes, at the uniform rate of twelve per cent. interest per annum; and also in buying and discounting orders, bonds, and promissory notes, at the same usurious rates of interest, from members and depositors, and persons other than members or depositors; and also that it still is so dealing with its members and depositors; but not with persons other than members or depositors. The first section of the law (S. & S. 194) declares the purpose of associations incorporated under it to be the "raising of money to be loaned among the members and depositors of such corporation, for use in buying lots or houses, or in building or repairing houses, or other purposes." The declared purposes here are plain and unmistakable; and this association, by the provisions of its constitution and by-laws, has, upon paper, kept itself strictly within the purposes declared, without attempting to bring into action any of the latent powers that may repose in the phrase, "or other purposes," with which the enumeration closes. There is no countenance to be given to the idea that associations incorporated under the act above referred to can be used by capitalists as instrumentalities for obtaining more than the legal rate of interest on their money by depositing it with the association, and having it used in modes foreign to the declared purposes of their organization. The first proviso of the second section of the act is not VOL. XXIX-7 |