
    Building and Loan Associations’ Loans.
    
      Building and loan associations — Power to borrow money — Certificates of indebtedness — Temporary loans — Act of June 25,1895.
    
    1. Under the Act of June 25, 1895, B. L. 303, a building and loan association may temporarily borrow money by the issue of certificates of indebtedness, where it is necessary to meet demands occasioned when a series of stock has matured, or when applications for loans shall exceed the accumulations in the treasury.
    2. The words “make temporary loans,” as used in the act, must be interpreted as meaning "borrow” or “secure a loan.”
    Attorney-General’s Department. Opinion to Hon. John W. Morrison, First Deputy Commissioner of Banking.
    Oct. 26, 1921.
   Gawthrop, Dep. Att’y-Gen.,

In answer to your communication of the 19th inst., asking to be advised whether a building and loan association can issue certificates of indebtedness, I have the honor to submit the following opinion:

The question whether a building and loan association, incorporated under and regulated by the law of our State, can lawfully borrow money can arise only under a statute or statutes, which are silent upon the subject. If the statutes expressly permit it, the right is precisely measured by the extent of the license granted: Endlich on Building Associations (ed. 1895), par. 286.

The Act of June 25, 1895, P. L. 303, extending the power of building and loan associations, provides, inter alia: “. . . They shall have the right, when a series of stock has matured, or when applications for loans by the stockholders thereof shall exceed the accumulations in the treasury, to make temporary loans of such sum or sums of money to meet such demands, not exceeding in the aggregate of such loan at any one time 25 per centum of the withdrawal value of the stock issued by said association. . . .”

The words “make temporary loans” must be interpreted as meaning “borrow” or “secure a loan.” The purpose for which money may be borrowed is limited to the cases enumerated in the excerpt cited from the Act of 1895. There is no sanction of the borrowing of money for other uses, except it be an implied sanction of the temporary borrowing of such moneys as may be required to purchase real estate on which such association may hold a mortgage or lien, or the borrowing of such moneys as may be necessary to protect the property of the association.

The form of obligation which the association shall give to secure its creditors in such cases is not prescribed by the statutes, and there is no legal objection to a certificate of indebtedness, provided the purpose of its issue is sanctioned. Of course, a certificate of indebtedness cannot be issued as a form of investment. From Guy H. Davies, Harrisburg, Pa.  