
    The State of Ohio ex rel. Attorney General v. The Interstate Savings Investment Company.
    
      Contracts of investment security, debentures or certificates— Called and ■ redeemed by method of unequal advantage to holders are unlawful, when — Accumulation of reserve fund by lapses also unlawful, when.
    
    1. Contracts of investment security, debentures or certificates, which by the device of a “numeral-apart,” may be called in and redeemed at any period before they would regularly accumulate a credit in the reserve fund equal to the stipulated endowment value, and otherwise giving unequal advantages to the certificate holders, contain the elements of chance and prize constituting a lottery, and are unlawful.
    2. Contracts of investment security, debentures or certificates, which cannot reasonably be expected to accumulate a reserve fund equal to the stipulated endowment values .within the stated period, without aid from, lapses or appropriation from premiums on new business, are fraudulent, contrary to public policy and unlawful.
    (Decided March 26, 1901.)
    In Quo Warranto.
    By petition in quo loarranto the attorney general alleges that the defendant, The Interstate Savings Investment Company, has continuously since its incorporation within this state misused its corporate authority, franchises and privileges, and assumed franchises and privileges not granted to it, particularly in issuing and selling a certain form of investment security called by the defendant an “Accumulative Endowment Certificate.” A copy of this certificate series A is hereafter given.
    The defendant by answer and amendment to answer sets out in detail the manner of doing business by the defendant company, admits that it is issuing the certificates series A, and says that it is also issuing certain other certificates series B, C and D, copies of which are hereafter given. The attorney general demurs to the answer upon the ground that the answer does not state facts sufficient to constitute a defense to the cause of action stated in the petition.
    SERIES “A.”
    The Interstate Savings Investment-Company.
    General Offices, Cincinnati, Ohio.
    By this accumulative endowment certificate does promise and agree to pay......................... or order, upon surrender, redemption or maturity of this certificate, or, in the event of death, pay the owner’s heirs, or legal representatives, the amount as shown in the table of values herein, and in accordance with the terms and conditions herein, and the application herefor, which are hereby made a part and parcel of this certificate as fully as if recited over the signatures hereto attached.
    In witness whereof, the said Interstate Savings Investment Company has by its duly authorized officers, signed, sealed and delivered, this contract this ........day of.........., one thousand nine hundred ..............
    (Seal.) S. A. Stevens, President.
    (Seal.) Wm. R. Sypher, Secretary.
    TERMS AND CONDITIONS.
    Dues — The dues on this certificate are twelve dollars per annum, but may be paid semi-annually, quarterly or monthly. All dues after the first payment must be paid at the main offices or to some properly authorized collector of the company, between the hours of 9:00 A. M. and 5:00 P. M., on or before the 15th day of each month, beginning with the month following the date of this certificate.
    Fines — An additional ten days of grace is allowed, with a fine of ten per cent., and if, at the expiration of the ten days, the fine and delinquent dues are not paid in full, the owner hereof forfeits all payments made hereon to the several funds to which they have been apportioned.
    Remittances — All remittances made on this certificate are made at the risk of the owner. If any remittances hereon be mailed on the 15th or 25th days of the month, and if the date of mailing be verified by the postoffice stamp, then this certificate shall not be subject to fine or forfeiture. When the 15th or 25th falls on Sunday or a legal holiday then the first business days respectively thereafter shall be regarded the same as the 15th and 25th of the month. No receipts for dues is valid without the signature of the treasurer, or of some one acting by his written authority.
    Apportionment of Funds — The first six months’ payment are passed to the credit of the reserve and expense funds. All subsequent monthly dues, when paid, are apportioned to the several funds as follows: Sixty-five per cent, to the redemption fund; twenty per cent, to the reserve fund, and fifteen per cent, to the expense fund. All fines and transfer fees are passed to the credit of the reserve fund.
    Non-Forfeitable — The monthly installments on this certificate, having been paid in full to and including the thirty-sixth month from the date of issuahce hereof, shall render it non-forfeitable. Should the payment of dues on this certificate be continued after it had become non-forfeitable, it shall be considered a contributing, non-forfeitable certificate, and, if redeemed, shall be entitled to its endowment value, but should the payment of dues be discontinued at any time after the thirty-sixth month it shall be considered a non-contributing, non-forfeitable certificate, and will not be eligible for the cash surrender privilege, but must be held to be paid by special redemption or maturity and when paid will be entitled to its paid-up value only, at the time it became non-contributing.
    Reinstatement — Any non-forfeitable, non-contributing certificate can be reinstated as a contributing certificate by the payment of all back dues and a reinstatement fee equal to the accumulated fines, provided said certificate will not be reached by special redemption within one year, nor redeemed by regular redemption in the month in which the back dues are paid.
    Surrender Value — Any time after one year, if this is a contributing certificate, the owner hereof may make application for its surrender value. If this certificate is one hundred and twenty months old or less, it will be paid out of the redemption fund, but if it is over one hundred and twenty months old, it will be paid out of the reserve fund its proportionate share of same, and the difference, if any, from the redemption fund. -
    All dues must be paid until application is reached and paid. All cash surrenders have precedence over all other redemptions.
    Special Redemptions — Not less than twenty percent. of the total amount contributed to the redemption fund is applied every month to redeem in consecutive order the lowest numbered certificates in force, paying for their surrender, if non-contributing, their paid-up value; or, if contributing certificates, tbeir endowment value.
    Regular Redemptions — The company reserves the right to call in and pay this certificate at any time previous to its maturity, by paying out of the redemption fund for its surrender, if a contributing certificate its endowment value. If a non-contributing, nonforfeitable certificate, it is not eligible to the regular redemption. In no case are certificates eligible for redemption until they have been in force seven months. The method used in this redemption is applied monthly and consists in paying certificates so many numbers apart, and in paying as many of them as the regular redemption fund will cover. The numbers of all certificates previously retired, are not considered in the count.
    The Numeral Apart is determined each month by taking a percentage of the total number of contracts in force. The percentage used shall be the same as published in the bulletin the previous month, and can not be altered unless thirty days’ notice has been given in the bulletin.
    Having determined the numeral, the count is begun with the oldest certificate in force (after the surrender and special redemptions have been made for the month) and continues through as many live certificates as the numeral indicates, the last one counted being the one called in for payment.
    Proceeding to count in like manner from the certificate so called in, the second one to be paid is reached; this method is continued until the sum of all the values of the certificates thus called in equals the amount in the regular redemption fund. The numeral for succeeding months is determined in the same way, and the count begins from the last certificate called in and paid the month previous.
    The directors reserve the right to modify this method of redemption at such a time, and in such a manner, as will in their judgment be to the best interests- of all certificate holders.
    Loans — At any time after the last day of the twelfth month from the date of this certificate, all monthly installments due hereon having been paid in full, the owner may make application for a loan, not to exceed its reserve credit. This certificate will be accepted as collateral to a note for a loan and must be deposited with the company. The loan may be made at the option only of the company, and from any of its loanable funds. If the owner fail to keep this certificate in force, then, in default of a monthly payment due hereon, it shall immediately become due and payable out of the regular redemption fund for its surrender value. From the proceeds of said redemption, the note with all interest due thereon, shall first be paid; the remainder, if any, shall be paid to the owner, and the company shall be relieved from any other or further liability on this certificate, and the owner likewise shall be relieved from any further 1L ability on this certificate, and the owner likewise shall be relieved from liability on his saití note.
    Maturity — This certificate, if a contributing one, will mature and will be paid from the reserve fund when the amount to its credit in the reserve fund equals its endowment value, or if a non-contributing, non-forfeitable certificate, it will be paid when the amount to its. credit in the reserve fund equals its paid-up value, at the time it .became non-contributing.
    Transfer — This certificate is transferable, but only on the books of the company. When a transfer is desired, fill out one of the assignment blanks on the back of this certificate, with the name of the person to whom it is to be transferred, written on the first line ; and the signature of the owner on the second line; then forward the certificate to the company to have the transfer recorded. A fee of one dollar is charged for the transfer of each certificate, and the fee must accompany the certificate.
    Death of Owner — In the event of the death of the owner of this certificate, his legal representatives may, upon application within sixty (60) days after the date of death, avail themselves of any of the following options. All installments due hereon must be paid, according to contract, until the company has been notified which option has been accepted.
    1st. Continue the payment of monthly dues until this certificate is redeemed or becomes non-forfeitable.
    2d. Surrender the certificate at any time within six months from the date hereof, and receive in cash from the redemption fund the total amount paid hereon, exclusive of the first monthly payment.
    3d. Surrender this certificate at any time after six months from the date hereof, and if a contributing one, receive in cash from the redemption fund its paid-up value, or if a non-contributing certificate its paid-up value at the time it became non-contributing.
    Applications under options two and three, are considered as surrender redemptions. All applications are considered in the order of their receipt, and are paid out of a fund consisting, according to requirements, of not more than sixteen per cent, of the total redemption fund, for any. one month.
    When deaths for any one month require more than the total amount appropriated for this purpose then those remaining unpaid are taken up in succeeding months in their regular order.
    Authority of Agents — No promises, representations, or agreements of any agent or employe, not contained herein, shall be of any binding force or effect on the company; and no agent or employe has any authority to change or modify in any manner whatever, the terms, regulations, conditions or provisions of this contract.
    
      
      
    
    
      Series B. No.
    The Interstate Savings Investment Company.
    General Offices, Cincinnati, Ohio.
    By this accumulative endowment certificate does promise and agree to pay.......................... or order, upon surrender, redemption or maturity of this certificate, or, in the event of death, pay the owner’s heirs, or legal representatives, the amount as shown in the table of values herein, and in accordance with the terms and conditions herein, and the application herefor, which are hereby made a part and parcel of this certificate as fully as if recited over the signatures hereto attached.
    In witness whereof, the said Interstate Savings Investment Company has by its duly authorized officers, signed, sealed and delivered, this contract this ........day of.........., oné thousand nine hundred ..............
    (Seal.) S. A. Stevens, President.
    (Seal.) . Wm. R. Sypher, Secretary.
    Such certificate, when sold and issued by the company to the purchaser, has filled into it, by an officer of the company, the name of the holder, together with the date of the purchase.
    Upon the inside of said certificate are printed the terms and conditions attached to the investment certificate as printed upon its outside page one. Said terms and conditions are as follows:
    TERMS AND CONDITIONS.
    Premium — The monthly premium on this certificate, originally issued with five coupons, is $1.00 on each coupon, and must be paid at the main office or to a properly authorized collector of the company, between the hours of 9:00 A. M. and 5:00 P. M., and between the 1st and 15th day of each month after date of issue, without notice. Premiums may be paid annually, semi-annually or quarterly, in advance. No premiums will be required or accepted after the one hundred and twentieth monthly premium has been paid.
    Fines — If the premiums are not paid in accordance with the preceding clause, a fine of ten cents on each coupon is assessed, and if the fine and delinquent premium is not paid by the 25th of the month in which the premium is due, the owner forfeits all premiums paid hereon to the several funds to which they have been apportioned; except that this certificate may be reinstated within sixty days by the payment of the premiums due hereon and reinstatement -fee of one dollar.
    Remittances — All remittances made on this certificate are made at the risk of the owner. If any remittances hereon be mailed on the 15th or 25th days of the month, and if the date of mailing be verified by the .postoffice stamp, then this certificate shall not be subject to fine or forfeiture. When the 15th or 25th falls on Sunday or a legal holiday then the first business days respectively thereafter shall be regarded the same as the 15th and 25th of the month. No receipts for dues is valid without the signature of the treasurer, or of some one acting by his written authority.
    Apportionment of Premiums — The first six months’ premiums are passed to the credit of the reserve and expense funds; all subsequent premiums, when paid, are apportioned to a reserve, a redemption, and expense fund, with not more than ten per cent, to the expense fund, nor less than twenty-five per cent, to the reserve fund.
    Liability — The liability on this certificate shall be the reserve credits on its unretired coupons. The reserve credit on this certificate shall be not less than twenty-five per cent, of all premiums paid on its unretired coupons and the interest earnings thereon.
    Tontine Fund — The reserve contributions from retired coupons shall constitute the tontine fund. This fund, with its interest earnings, together with the reserve fund, shall be used to mature certificates.
    Surplus Fund — All fines, transfer fees, reinstatement fees and interest thereon, shall constitute the surplus fund.
    Redemption Fund — The redemption fund is used to pay surrender values, death claims and endowment values before the coupons mature, taking precedence in the order named.
    Surrender Value — At any time after one year from the date of this certificate, the owner may make application for the surrender value of the attached coupons, as per table of values printed thereon, provided the monthly premiums have been paid to date of application. All applications are considered in the order of their receipt, and paid out of the redemption fund, except after the 120th month, when the reserve and tontine funds apportioned to the credit of each coupon can be used. Should the redemption fund for any month be insufficient to pay all surrender values, then those remaining unpaid are taken up in succeeding months in their regular order. All premiums must be paid until the application is reached and paid.
    Death — In the event of the death of the owner of this certificate, his legal representatives may, within sixty days after death, make application to the company for the endowment value at the time the application is made, as shown in the table printed hereon. All premiums due hereon must be paid according to contract until the application has been made. These applications are considered in the order of their receipt, and are paid out of the redemption fund after all surrender values have been paid. Should the amount available in the redemption fund be less than the amount of death claims, then those remaining unpaid are taken up in succeeding months in their regular order. If this certificate has been transferred, the legal representatives must prove, to the satisfaction of the company, that the owner was in good health at the time the transfer was made.
    Redemptions — The company reserves the right to call in coupons at any time after six months from date of issue, by paying for their surrender from the redemption fund their endowment value, as shown in the table of values printed hereon.
    Order of Payment — When coupons are called in for redemption before maturity, the order of payment shall be one coupon on each certificate in consecutive order, beginning with the lowest numbered certificate and reverting when the highest numbered certificate eligible for redemption has been reached. The company reserves the right at any time to call in and redeem in consecutive order the oldest certificates in force.
    Maturity — The premiums having been paid in full on attached coupons to the one hundred and twentieth month inclusive, shall render said coupons eligible to mature, and they will be paid out of the reserve and tontine funds when the proportionate share each coupon has to its credit in these funds equals ($192.00) one hundred and ninety-two dollars.
    Loans — At any time after the last day of the twelfth month from the date of this certificate, all monthly premiums due hereon having been paid in full, the owner may make application for a loan, not to exceed its liability. This certificate will be accepted as collateral to a note for the loan and must be deposited with the company. The loan may be made at the option only of the company, and from any of its loanable funds. If the owner fail to keep this certificate in force, then, in default of a monthly premium due hereon, it shall immediately become due and payable out of the redemption fund for its surrender value. From the proceeds of said redemption, the note, with all interest due thereon, shall first be paid; the remainder, if any, shall be paid to the owner, and the company shall be relieved from any other or further liability on this certificate, and the owner likewise shall be relieved from liability on his said note.
    Transfer — This certificate is transferable, but only on the books of the company, and a fee of $2.00 is charged. When a transfer is desired, fill out one of the assignment blanks on the back of this certificate, with the name of the person to whom it is to be transferred written on the first line, and the signature of the owner on the second line, then forward the certificate, together with the fee, to the company to have the transfer recorded.
    Authority of Agents — No promises, representations, or agreements of any agent or employe, not contained herein, shall be of any binding force or effect on the company; and no agent or employe has authority to change or modify in any manner whatever, the terms, regulations, condition or provisions of this contract.
    Loss — In case this certificate is lost, the owner may have a duplicate issued by making an affidavit upon a blank furnished by the company;, and the payment of a fee of one dollar.
    There is likewise printed into and as a part of the terms and conditions what is called a table of values, which indicates the value of such certificates upon the respective months of the existence of the certificate, in which said, table there is no death benefit or paid-np value, the death benefit being the endowment value, and there is no paid-up value. Said table of value is as follows:
    
      
    
    
      Attached to the certificate are printed five coupons, A, B, O, D and E, respectively, which said coupons are as follows:
    
      
    
    
      Series C. No.
    The Interstate Savings Investment Company.
    General Offices, Cincinnati, Ohio.
    By this accumulative endowment certificate does promise and agree to pay to...................... or order, subject to the terms and conditions herein, and in the application herefor contained, at or before maturity of this'certificate, an amount equal to all the. payments made on said certificate, together with interest thereon at the rate of six (6%) per cent, per annum, and in addition thereto, a share of the net surplus earnings of said company to said certificate apportioned pro rata, not to exceed the amounts as shown in the schedule of values herein contained.
    In witness whereof, the said Interstate Savings Investment Company has by its duly authorized officers, signed, sealed and delivered, this contract this ........day of.........., one thousand nine hundred ..............
    (Seal.) ................, President.
    (Seal.) ................, Secretary.
    Such certificate, when sold and issued by the company to the purchaser, has filled into it, by an officer of the company, the name of the holder, together with the date of the purchase.
    Upon the inside of said certificate are printed the terms and conditions attached to the investment certificate as printed upon its outside page one. Said terms and conditions are as follows:
    TERMS AND CONDITIONS.
    Premiums — This accumulative endowment certificate, is issued in consideration of the promise and written agreement in the application of the purchaser hereof to pay a monthly premium of one dollar, until 220 of such monthly premiums shall be paid. Such monthly premiums must be paid at the main office or to a properly authorized collector of the company, between the hours of 9:00 A. M. and 5:00 P. M., on the first day of each month after date of issue, without notice. Provided, however, that if the first day of the month falls upon a Sunday or a legal holiday, said premiums are due between said hours on the first legal day thereafter. Premiums may be paid annually, semi-annually or quarterly, in advance.
    Fines — If said premiums are not paid by 5 P. M. on the 25th day of the month, a fine of 10 cents will be assessed. If all delinquent premiums and fines assessed hereon are not paid at or before 5 P. M. on the 25th day of the month in which they are due, this certificate shall be deemed to be lapsed, and will not be eligible to participate in the redemption for the month for which the premium is in default, and all premiums paid hereon shall be forfeited to the funds respectively to which they have been apportioned. Provided, however, this certificate may be reinstated within sixty days, by the payment of the premiums due hereon and a reinstatement fee of twenty-five cents.
    Remittances — All remittances made on this certificate are made at the risk of the owner. If any remittances hereon be mailed on the 15th or 25th days of the month in which they are due, and if the date of mailing be verified by the postoffice stamp, then this certificate shall not be subject to a fine or forfeiture. When the 15th or 25th falls on a Sunday or a legal holiday, then the first business days respectively thereafter, shall be regarded the same as the 15th and 25th of the month. No receipt for premiums is valid. without the signature of the treasurer, or of some one acting by his written authority.
    Apportionment op Premiums — The first' six months’ premiums are passed to the credit of the reserve and expense funds, provided, that not less than twenty-five per cent, thereof shall be passed to the credit of the reserve fund. All subsequent premiums. are apportioned to the reserve, the redemption and the expense funds, as follows: Not less than twenty-five per cent., and such greater per cent, as shall be necessary to provide for the payment, of this certificate at maturity, to reserve; not more than ten per cent, to expense; the balance to redemption.
    Reserve and Tontine Funds — The reserve contributions on unretired certificates shall constitute the reserve fund. The reserve contributions on retired certificates shall constitute the tontine fund. The tontine fund and reserve fund, together with their interest earnings, shall be used to retire matured certificates.
    Redemption Fund — The redemption fund shall be used, First, to retire certificates at cash surrender value; Second, to retire certificates at death surrender values; and Third, to redeem certificates at the redemption value, before maturity.
    Surplus Fund — All fines, transfer fees, reinstatement fees and interest earnings thereon, shall constitute the surplus fund. Said fund shall be used in the discretion of the board of directors for the uses and purposes of the business of the company.
    Classes — Certificates are issued in monthly classes, désignated by the name of the month and year of their issue. The reserve and tontine funds created by each class are apportioned respectively to such class. When, by reason of the retirement of all of the certificates belonging to a class, the reserve fund of that class has been passed to the credit of the ton-tine fund of that class, such tontine fund shall be apportioned to the tontine funds of all the classes having certificates unretired, upon the basis of the number of reserve contributions made by the classes respectively. Such distribution to be made only on December 31st of each year.
    Liability — The company’s liability on this certificate shall be the amount of the reserve credits, together with interest earnings thereon, and in addition, its proportionate share, of the tontine fund, including interest earned thereon, belonging to its class.
    Non-Forfeitable — The monthly premiums on this certificate, having been paid in full to and including the thirty-sixth month from the date of issuance hereof, shall render it non-forfeitable.. Should thé payment of premiums hereon be continued after it has become non-forfeitable, it shall become a.contributing, non-forfeitable certificate, and when redeemed, shall be entitled to its redemption value. Should the payment of premiums, be discontinued at any time after the thirty-sixth month, it shall be considered a noncontributing, non-forfeitable certificate, and it will not be eligible for the cash surrender privilege or for redemption, but must be held to be paid at maturity, and when paid will be entitled only to its guarantee value at the time it became non-contributing. Any non-contributing, non-forfeitable certificate, may be reinstated as a contributing one, by the payment of all back premiums and a reinstatement fee, equal to the accumulated fines, provided said certificate is not to be paid by the consecutive order of payment or maturity, within one year, nor redeemed in the month in which the back premiums are paid.
    Surrender Value — At any time after one year from the date of this certificate, provided all premiums have been paid in accordance with the terms hereof, the owner may make application for its cash surrender value; said value shall be the guaranteed cash surrender value, as per the table of values set forth herein. Applications will be paid in the order in which they are received, out of the redemption fund; except after 120 premiums have been paid, at which time the reserve and tontine funds to the amount of the liability of this certificate may be used. All premiums must be paid until the application is reached and paid, or until 120 premiums have been paid.
    Death — In the event of death of the original owner of this certificate, his legal representatives may avail themselves of the following options:
    1st. Continue the performance of this contract in the stead of said certificate owner, without the payment of transfer fee.
    2nd. At any time within 60 days after death, make application in form required by the company, for the death surrender value of this certificate, which shall be the total amount of premiums paid hereon at the time said application is made. This option may be taken advantage of by the legal representatives of the original purchaser hereof only, and upon not to exceed fifty certificates.
    All premiums due hereon must be paid according to this contract until such application has been made. Applications will be paid in order of their receipt, out of the redemption fund, after all cash surrender values have been paid. If the amount available in any month to pay all death claims be insufficient, then those unpaid are taken up in succeeding months in their regular order.
    Redemption — The company reserves the right to call in this certificate for redemption at any time after six monthly premiums shall be paid hereon, and before maturity.
    Maturity — The 120 premiums having been paid in full on this certificate, shall render said certificate fully paid and eligible to mature, and it will be paid immediately out of the reserve and tontine funds, if the apportionate share to its credit in said funds, with the interest accumulations thereon, equals the total amount of payments hereon, together with interest at the rate of six per cent, per annum; otherwise, when the apportionate share to its credit in said fund, with the interest accumulations thereon, equals the total amount of the payments hereon, together with interest at the rate of six per cent, per annum; provided, however, that such date of payment shall not be later than the time when the sum of all premiums paid hereon, less not to exceed 10 per cent, thereof deducted for expenses, if said sum had been invested at the current rate of interest, compounded semi-annually, would equal the total amount of the premiums paid hereon, together with interest at the rate of six- per cent, per annum. If this certificate be a non-contributing, non-forfeitable one, it will be eligible to mature at any time after one hundred and twenty months, when the amount to its credit in the reserve and tontine funds, equals the guarantee value at the time it became non-contributing.
    Loans — At any time after the last day of the twelfth month from the date of this certificate, all monthly premiums due hereon having been paid in full, the owner may make application for a loan, not to exceed its liability, on December 31st, preceding. This certificate will be accepted as collateral to a note for the loan and must be deposited with the company. The loan may be made only at the option of the company, and from any of its loanable funds. If the owner fail to keep this certificate in force, then, in default of a monthly premium due hereon, it shall immediately become due and payable out of the redemption fund, for its surrender value. From the proceeds of said redemption, the note with all interest due thereon, shall first be paid; the remainder, if any, shall be paid to the owner, and the company shall be relieved from any other or further liability on this certificate, and the owner likewise shall be relieved from liability on his said loan and note.
    Transfer — This certificate is transferable, but only on the books of the company, and a fee of $1.00 is charged. When a transfer is desired, fill out one of the assignment blanks on the back of this certificate, with the name of the person to -whom it is to be transferred written on the first line, and the signature of the owner on the second line, then forward the certificate, together with the fee, to the company to have the transfer recorded.
    Loss — In case this certificate is lost or destroyed, the owner may have a duplicate issued by making an affidavit upon a blank furnished by the company, and the payment of a fee of one dollar.
    Authority of Agents — No promises, representations, or agreements of any officer, agent or employe, not contained herein shall be of any binding force or effect on the company; and no officer, agent or employe has any authority to change or modify in any manner whatever, the terms, regulations, conditions or provisions of this contract.
    There is likewise printed into and as a part of the terms and conditions what is called a table of values, which indicates the value of such certificate upon the respective months of the existence of the certificate, there being first the guaranteed value; second, the estimated maximum endowment value, and third the cash surrender value of such certificate.
    Said table of values is as follows:
    
      
    
    
      Series D. No.
    The Interstate Savings Investment Company.
    General Offices, Cincinnati, Ohio.
    By this accumulative endowment certificate does promise and agree to pay to...................... or order, subject to the terms and conditions herein, and in the application herefor contained, at or before maturity of the coupons hereto attached, an amount equal to all the payments made on said coupons respectively, together with interest thereon at the rate of four (á%) per cent, per annum, and in addition thereto, a share of the net surplus earnings of said company to said coupons apportioned pro rata respectively, not to exceed the amounts as shown in the schedule of values herein contained.
    In witness whereof, the said Interstate Savings Investment Company has by its duly authorized officers, signed, sealed and delivered, this contract this ........day of.........., one thousand nine hundred..............
    (Seal.) ................, President.
    (Seal.)' ................, Secretary.
    'Such certificate, when sold and issued by the company to the purchaser, has filled into it, by an officer of the company, the name of the holder, together with the date of the purchase.
    Upon the inside of said certificate are printed the terms and conditions attached to the investment certificate as printed upon its outside page one. Said terms and conditions are as follows:
    TEEMS 'AND CONDITIONS.
    Premiums — This accumulative endowment certificate, with five coupons attached, is issued in consideration of the promise and written agreement in the application of the purchaser hereof to pay a monthly premium of $1.00 per coupon on each coupon attached hereto, until 120 of such monthly premiums shall he paid. Provided, however, that when any of said coupons are redeemed or' otherwise retired, monthly premiums on such coupons shall then cease. Such monthly premiums must be paid at the main office or to a properly authorized collector of the company, between the hours of 9:00 A. M. and 5:00 P. M., on the first day of each month after date of issue, without notice. Provided, however, if the first day of the month falls upon a Sunday or a legal holiday, said premiums are due between said hours on the first legal day thereafter. Premiums may be paid annually, semi-annually or quarterly, in advance.
    Fines — If said premiums are not paid by 5 P. M. on the loth day of the month, a fine of 10 cents per coupon will be assessed. If all delinquent premiums and fines assessed on the coupons hereon are not paid at or before 5 P. M. on the 25th day of the month in which they are due, this certificate shall be deemed to be lapsed, and will not be eligible to participate in the redemption for the month for which the premium is in default, and all premiums paid hereon shall be forfeited to the funds respectively to which they have been apportioned. Provided, however, this certificate may be reinstated Avithin sixty days, by the payment of the premiums due hereon and a reinstatement fee of one dollar.
    Remittances — All remittances made on this certificate are made at the risk of the owner. If any remittances hereon be mailed on the 15th or 25th days of the month in Avhich they are due, and if the date of mailing be verified by the postoffice stamp, then this certificate shall not be subject to a fine or forfeiture. When the 15th or 25th falls on a Sunday or a legal holiday, then the first business days respectively thereafter, shall be regarded the same as the 15th and 25th of the month. No receipt for premiums is valid without the signature of the treasurer, or of some one acting by his written authority.
    Apportionment op Premiums — The first six months’ premiums are passed to the credit of the reserve and expense funds, provided, that not less than twenty-five per cent, thereof shall be passed to the credit of the reserve fund. All subsequent premiums are apportioned to the reserve, the redemption and the expense funds, as follows: Not less than twenty-five per cent., and such greater per cent, as shall be necessary to provide for the payment of the coupons hereto attached at maturity, to reserve; not more than ten per cent, to expense; the balance to redemption.
    Reserve and Tontine Funds — The reserve contributions on unretired coupons shall constitute the reserve fund. The reserve contributions on retired coupons shall constitute the tontine fund. The ton-tine fund and reserve fund, together with their interest earnings, shall be used to retire matured coupons.
    Redemption Fund — The redemption fund shall be used, First, to retire coupons at cash surrender values; Second, to retire coupons at death surrender values; and, Third,' to redeem coupons in accordance with the method of redemption hereinafter set forth.
    Surplus Fund — All fines, transfer fees, reinstatement fees and interest earnings thereon, shall constitute the surplus fund. Said fund shall be used in the discretion of the board of directors for the uses and purposes of the business of the company. •
    
      Classes — Certificates are issued in monthly classes, designated by the name of the month and year of their issue. The reserve and tontine funds created by each class are apportioned respectively to such class. When, by reason of the retirement of all of the coupons belonging to a class, the reserve fund of that class has been passed to the. credit of the tontine fund of that class, such tontine fund shall be apportioned to the tontine funds of all the classes having coupons unretired, upon the basis of the number of reserve contributions made by the classes respectively. Such distribution to be made only on December 31st of each year.
    Liability — The company’s liability on this certificate shall be the amount of the reserve credits together with interest earnings thereon, on its unretired coupons and in addition, based upon the number of its unretired coupons, its proportionate share of the tontine fund, including interest earned thereon, belonging. to its class.
    Non-Forfeitable — The monthly premiums on coupons attached to this certificate, having been paid in full to and including the thirty-sixth month from the date of issuance hereof, shall render it non-forfeitable. Should the payment of premiums hereon be continued after it has become non-forfeitable, it shall become a contributing, non-forfeitable certificate, and the coupons, when redeemed, shall be entitled to their redemption value. Should the payment of premiums be discontinued at any time after the thirty-sixth month, it shall be considered a non-contributing, non-forfeitable certificate, and the coupons will not be eligible for the cash surrender privilege or for redemption, but must be held to be paid at maturity, and when paid will be entitled only to the amount paid in premium^ on attached coupons.
    Surrender Value — At any time after one year from the date of this certificate, provided all premiums have been paid in accordance with the terms hereof, the owner may make application for the cash surrender value of the attached coupons; said value shall be the guaranteed cash surrender value, as per the table of values set forth herein. Applications will be paid in the order in which they are received, out of the redemption fund; except after 120 premiums have been paid, at which time the reserve and tontine funds to the amount of the liability of this certificate may be used. All premiums must be paid until the application is reached and paid, or until 120 premiums have been paid.
    Death — In the event of death of the original owner of this certificate, his legal representatives may avail themselves of the following options:
    1st. Continue the performance of this contract in the stead of said deceased certificate owner, without the payment of transfer fee.
    2nd. At any time within 60 days after death, make application in form required by the company, for the death surrender value of this certificate, which shall be the total amount of premiums paid on its unretired coupons at the time said application is made. This option may be taken advantage of by the legal representatives of the original purchaser hereof only, and upon not to exceed fifty coupons.
    All premiums due hereon must be paid according to this contract until such application has been made. Applications will be paid in order of their receipt, out of the redemption fund, after all cash surrender values have been paid. If the amount available in any month to pay all death claims be insufficient, then those unpaid are taken up in succeeding months in their regular order.
    Redemption — The company reserves the right to call in for redemption any or all of the coupons attached to this certificate at any time after six monthly premiums shall be paid thereon, and before maturity. When coupons are called in for redemption before maturity, the order of payment shall be one coupon on each certificate in consecutive order, beginning with the lowest numbered certificate and reverting when the highest numbered certificate eligible for redemption has been reached. The company reserves the right at any time to call in and redeem in consecutive order, the oldest certificates in force.
    Maturity — The 120 premiums having been paid in full on the attached coupons, shall render said coupons fully paid and eligible to ‘mature, and they will be paid, immediately out of the reserve and tontine funds, if the apportionate share to the credit of each coupon in said funds, with the interest accumulations thereon, equals the total amount of the payments on such coupons, together with interest at the rate of four per cent, per annum; otherwise when the apportionate share to the credit of each coupon in said fund, with the interest accumulations thereon, equals the total amount of the payments on such coupons, together with interest at the rate of four per cent, per annum ; provided, however, that such date of payment shall not be later than the time when the sum of all of the premiums paid'on the unretired coupons hereon, less not to exceed 10 per cent, thereof deducted for expenses, if said sum had been invested at the current rate of interest, compounded semi-annually, would equal the total amount of the premiums paid on such unretired coupons, together with interest at the rate of four per cent, per annum. If this certificate be a non-contributing, hon-forfeitable one, the coupons attached hereto, will be eligible to mature at any time after one hundred and twenty months, when the amount to their credit in the reserve and tontine funds, equals the amount paid as premiums thereon.
    Loans — At any time after the last day of the twelfth month from the date of this certificate, all monthly premiums due hereon having been paid in full, the owner may make application for a loan, not to exceed its liability, on December 31st, preceding. This certificate will be accepted as collateral to a note for the loan and must be deposited with the company. The loan may be made only at the option of the company, and from any of its loanable funds. If the owner fail to keep this certificate in force, then, in default of a monthly premium due hereon, it shall immediately become due and payable out of the redemption fund, for its surrender value. Prom the proceeds of said redemption, the note with all interest due thereon, shall first be paid; the remainder, if any, shall be paid to the owner, and the company shall be relieved from any other or further liability on this certificate, and the owner likewise shall be relieved from liability on his said loan and note.
    Transfer — This certificate is transferable, but only on the books of the company, and a fee of $2.00 is charged. When a transfer is desired, fill out one of the assignment blanks on the back of this certificate, with the name of the person to whom it is to be transferred written on the first line, and the signature of the owner on the second line, then forward the certificate, together with the fee, to the company to have the transfer recorded.
    
      Loss — In ease this certificate is lost or destroyed, the owner may have a duplicate issued by making an affidavit upon a blank furnished by the company, and the payment of a fee of one dollar.
    Authority of Agents — No promises, representations, or agreements of any officer, agent or employe, not contained herein shall be of any binding force or effect on the company; and no officer, agent or employe has any authority to change or modify in any manner whatever, the terms, regulations, conditions or provisions of this contract.
    There is likewise printed into and as a part of the terms and conditions what is called a table of values, which indicates the value of such certificates upon the respective months of the existence of the certificate, in which said table there is no death benefit or paid-up value, the death benefit being the endowment value, and there is no paid-up value. Said table of value is as follows :
    
      
      
    
    
      Attached to the certificates are printed five coupons, A, B, C, D and E, respectively, which said coupons are as follows:
    
      
    
    
      
      John M. Sheets, Attorney General, J. E. Todd, Smith W. Bennett and Swing, Cushing & Morse, for plaintiff.
    
      Charles IF. Baker, Michael G. HcJatz and Dioighi Harrison, for defendant.
    
      Dyer, Williams é Stoufer, for A. W. Dorbert, a debenture holder.
   Davis, J.

The attorney general makes his contention for ousting the defendant from the privilege of doing business in Ohio, on the provisions of certain contracts, or debentures, denominated by the defendant company “Accumulative Endowment Certificates,” distinguished as series A, series B, series C, and series D. It is claimed that the defendant has misused its corporate franchises and privileges in issuing these debentures, because they are upon the face of them, in contravention of law. It is insisted on the part of the relator, that some, at least, of these debentures are vitiated by containing elements of chance and prize so as to constitute a lottery scheme, and that all of them are calculated to deceive and defraud an unsuspecting public. The question here is not whether the promoters of the defendant company have intentionally devised a scheme to mislead and defraud; but whether that is the effect of it. The promoters and the investors may be self-deluded, or satisfied to take the chances offered; but that does not alter the character of the scheme. If the company is misusing its corporate privileges in such way as fo be a public abuse, the writ must issue regardless of the intent. Nor are we now called upon to draw the line of demarcation between such insurance and investment methods as have been approved by the law and the schemes now under consideration. We are not considering life insurance methods, tontine or other, building and loan associations, or investment companies in general. We are only concerned with the question whether the methods of this company are lawful or not. In this connection we recur to the averment in the answer to the effect that the defendant has literally complied with the requirements of an act of the legislature of Ohio “to regulate certificate bond and investment companies, partnerships and associations, other than building and loan companies, and to regulate investment guaranty eompanies, partnerships and associations doing business on the service dividend plan, and to protect holders of their certificates, debentures and securities,” and that the defendant has received from the secretary of state the certificates authorized by that act. If this averment was inserted in the answer with the understanding that compliance with the statue referred to legalized the financial schemes now under consideration, it is based on an erroneous theory. The legislature is presumed to have contemplated that a corporation thus authorized to do business in this state would exercise its franchises within chartered limits, and in a manner not injurious to the public. Leslie v. Lorillard, 110 N. Y., 531; People v. North River Sugar Refining Co., 121 N. Y., 582. This law was enacted expressly to regulate bond and investment companies and to protect the holders of their certificates. The legislature could not, and did not assume to, exercise judicial power by declaring that acts or contracts of such companies, which are inherently immoral and. prejudicial to the public welfare or unconstitutional should be lawful. Nor did the legislature undertake to declare public policy in regard to bond and investment companies further than that they should be regulated and that the holders of their securities should be in some measure protected.

It would serve no good purpose to detail the processes by which we have reached our conclusions after having carefully considered all of the elaborate arguments which have been submitted.

An inspection of the different classes of “accumulative endowment certificates” issued by the defendant, discloses that in none of them does a certificate absolutely and certainly mature within any fixed and definite period; yet the certificates are all so drawn as to create the expectation, and to make it appear, that they wall mature in a period of one hundred and twenty months. With all the light which we have received from counsel and other sources, we have been unable to persuade ourselves that the credit, to any of these classes of certificates, in the reserve fund, or in the reserve and tontine funds, will equal the endowment val ue within the stipulated periods, without the aid of lapses or the apportionment of funds derived from new business. Indeed it is almost self-evident that with seventy-five or eighty per cent, of the premiums received consumed in expenses and monthly redemptions, the reserve credits could not equal the endowment value in several times the periods stipulated. In other words, twenty or twenty-five per cent. of. the premiums, with its interest earnings, alone and unaided by lapses or the appropriation of money from premiums received for new business, will not sufficiently accumulate to equal the represented endowment value in the stipulated periods. A little calculation applied to the representations in any of these tables of values will demonstrate this proposition. If this deficiency in the reserve should be made up by appropriating premiums received on new business, it is obvious that in redeeming the old obligations new and greater ones are created, making the possibility of ultimate redemption of all the obligations still more problematical. But if the deficiency should be made up by lapses or forfeitures, it is equally clear that the lapses must be very numerous, so numerous in fact as to eventually destroy the credit of the company and bring ruin upon it. A scheme which can succeed only by lapses is manifestly a scheme which will enrich some at the expense of others who embark in the same enterprise. It holds out the inducement that those who may be strong enough to survive will find their profit in the weakness, the misfortunes and the discouragements which cause a larger number of their associates to fall by the way. Moreover, since the salvation of the company depends on these lapses, it necessarily tends to encourage and produce them. True enough, all of these certificates are non-forfeit-able after thirty-six monthly payments; but that only signifies that a larger number must fail in the first three years or that the whole scheme must fail, for the vice of the plan is, not that some may fail, but that many must fail in order that all continuing certificates shall mature. Formerly the profits from this source to life insurance companies were. understood to be very large and public attention being drawn to it, in many of the states laws regulating the non-forfeiture of policies were enacted; and such has been the force of public opinion, and public policy as expressed in these statutes, that it is believed that no standard company can be found which counts upon lapses as a necessary element in determining its ability to carry out its contracts; and all such companies so calculate as to carry out their contracts even should no lapses occur, except perhaps in some forms of tontine insurance. Indeed there is no fixed rate or percentage of lapses Avhich can be used as a basis of calculation. The percentage of lapses varies Avith different companies, and at different times Avith the same company. Shall this fallacious and uncertain element, which has thus been in so large a measure eliminated from legitimate business methods, be encouraged to reappear and to delude the inexperienced and the unwary? We cannot conceive it to be our duty to lend such encouragement.

But wherein is the chief attraction held out to the public by the defendant? In series A the certificates, or rather some of them, are liable to be matured fortuitously at periods more or less extended from the time of their issue. This is done by taking a percentage of the total number of contracts in force each month. This percentage, it must be observed, Avill be as Available and uncertain as the contingencies of business will make it. The numeral being thus determined the certificates are arbitrarily matured by beginning the count “with the oldest certificate in force (after the surrender and special redemptions have been made for the month) and continued through as many live certificates as the numeral indicates, the last one counted being the one called in for payment. Proceeding to count in like manner from the certificates so called in, the second one to be paid is reached; this method is continued until the sum of all the values of the certificates thus called in equals the amount in the regular redemption fund.” Turning now to the table of values in series A, we find that if a certificate is so redeemed at the end of twelve months the holder will receive $4.00 more than he has paid, that is 66 2-3 per cent, per annum simple interest on his investment for an average of six months, If a certificate should be redeemed at the end of twenty-four months the holder’s profit would still be 66 2-3 per cent, per annum upon his investment for an average of twelve months. If a certificate should be redeemed at the end of thirty-six months the holder’s profit would still be 66 2-3 per cent, per annum upon his investment for an average of eighteen months. From this point, the point at which the certificates become non-forfeitable, the percentage of profit decreases until at the one hundred and twentieth month it has gone down to 20 per cent, per annum simple interest on an investment of $120.00 for an average of five years. The rate of profit being unequal, the prize in this scheme is a large profit and quick return to the fortunate holder of a certificate selected for redemption, and the gaming chance is that his certificate will be called in for early redemption by the “numeral-apart” system of selection. Yet in face of all this counsel ask: “How can a scheme be a lottery in which there are no blanks and all investors for the payment of the same sums receive the same prize?” The blanks are all the numbers included in the extent of the “numeral-apart,” except the last one, which draws a prize, and the prize is pointed out above. Our conclusion is that series A is a lottery and unlawful, and that none of the schemes of defendant, as shown in certificates of series A, B, C and D will legitimately “finance out,” as represented. It follows that the demurrer to the answer should be sustained and that the prayer of the relator should be granted.

It should be added as the opinion of the whole court that it is the duty of the state treasurer to hold and distribute the fund deposited with him," in trust for the holders of the debentures in this state, according to the amount that may be found due to each one.

'Judgment of ouster.

Minshall, G. J., Williams, Bürket and Spear, JJ., concur.  