
    Seibel v. Building Association.
    
      Building and loan associations — Revised Statutes, section 3835 — Loans—Rebate of interest — Distribution of earnings.
    
    1. Section 3835 of the Revised Statutes, as amended April 15, 1880 (77 Ohio L. 208), does not provide for the cancellation of parts of a loan as year by year dues are paid in on shares, but such a loan is to he settled, with such dues and other credits, when the share is fully paid; and designating the ordinary dues as “ dues paid on loans awarded,” -does not change their nature or application.
    2. Section 3835 contains the provision that a building association, atibe end of each year, “shall make a rebate of interest on the amount of dues paid on loans awarded,” and it thereby provides that the interest-hearing power of such loans shall be reduced year by year-as dues are paid in on the shares, and that the interest payable on such loans shall he less year by year as such dues are paid in.
    3. The “value” of a share in a building association may not be a proper basis for distribution of earnings due such share; hut the amount of dues paid on such share and the other credits to the share make such a basis, whether or not a loan has been awarded on such a share.
    Error to the Superior Court of Cincinnati.
    This suit is brought by certain members of the Victoria Building- Association No. 2, who have borrowed money from the association, in behalf of themselves and all other members who have borrowed money from the association, to enjoin the defendant from enforcing the following amendment to its constitution :
    “An annual settlement shall be had with .each borrowing member, when he shall receive a rebate of interest on the amount of dues paid and earnings credited for the expiring year, but upon sums so credited he shall receive no further dividends.”
    This is an amendment to the following provision :
    “ The secretary shall calculate the profits of members every six months, and enter them in their pass books.”
    The plaintiffs alleged that, at the time they became members and borrowed the- money and gave the mortgages, the constitution of defendant provided that the secretary should, every six months, credit to the plaintiffs and all other members of the association the net earnings ; crediting to each his ratable share in proportion to the gross amount of dues paid upon shares held by him; that by the amendment defendant proposes to credit earnings to those members who have not borrowed money from it semi-annually upon the same basis as heretofore, but to credit earnings to plaintiffs and other members who have borrowed money from it only annually, and then upon a different basis, giving to them a very much smaller portion of the net earnings, to wit, in lieu of crediting them with earnings in proportion to all dues paid, it proposes to credit them only with earnings in proportion to the dues paid during the preceding year.
    The plaintiffs further aver that the amendment is in conflict with the statute of Ohio, which requires the earnings to be credited to all members, borrowers, and non-borrowers.
    The defendant answers, admitting the distribution of earnings by defendant as alleged in petition, admitting the enactment of the amendment, and that it effects the change alleged in the petition, and that it proposes to enforce the amendment unless enjoined, and that its enforcement will result to the damage of plaintiffs as claimed, but claims the power so to do by amending its constitution, and claims it to be equitable.
    And defendant, by cross-petition, claims that the amendment is in conformity with the provisions of the statute, and that plaintiffs have heretofore been wrongfully and illegally credited with an excessive portion-'of earnings, and asking the affirmative relief of a decree enjoining plaintiffs from transferring tbeir pass-books and decreeing the right of defendant to surcharge the account.
    To the answer a general demurrer is filed, and a general demurrer is filed to the cross-petition.
    Upon these demurrers the cause was reserved to the general term of the superior court, and that court rendered a judgment overruling both demurrers, and plaintiffs not desiring to further plead, rendered judgment of dismissal of plaintiffs’ bill, and a petition in error is now filed in this court to reverse that judgment.
    
      J. J. Glidden, for plaintiffs in error.
    
      Evans $ Boettinger, J. Skroder, and Coppock &; Coppock, for defendant in error.
   Follett, J.

The defendant is a building association. Such a body exists for the equal benefit of all its members, who are presumed to be pei’sons whose earnings are small, and who seek to use small weekly savings in procuring suitable homesteads. Every member is presumed to become, at some time, a borrower to the extent of his interest. Building associations are not intended to enable money lenders to obtain extraordinary interest, .but they are intended to help in securing homes with the aid of small incomes. They may become oppressive, and they may be conducted so as to bring hope and secure comfortable homes.

Each member is a share-holder, and he pays for his share or shares by paying weekly a certain sum on a share, and by earnings credited. This is payment on stock or shares subscribed. The earnings of the association include all sources of income except the stated dues.

When the defendant was organized, and prior to 1880, the statute as to the disposition of earnings was as follows (Revised Statutes, section 3835): “So much of the earnings'as may be necessary, not exceeding ten per cent., per annum, may be set apart to defray the current expenses of thé associations, .and for the purchase of such real estate 31s may. be necessary for the convenient transaction of their business ; and the residue of .such, earnings shall be transferred to the credit ,of the share-holders, to be paid ratably to them when the shares are fully paid.”

. On April 15, 1880 (77 Ohio L. 208), this section was amended in several important provisions, and, in matter of earnings, providing as follows : Section 3835. So much of the earnings as may be necessary shall be set apart to defray, the current expenses of the association, and a portion of the earnings, to be determined by the board of directors, shall be reserved, annually or semi-annually, for the payment of contingent losses, and the residue of such earnings shall be transferred to the credit of all members, borrowing and non-borrowing, to be paid ratably to them at such times and in such manner as the association, by its constitution and by-laws, rules and regulations, in conformity with this act, may provide; and upon 'the cancellation of any share or shares that have been fully paid, by dues paid in and earnings credited, the association shall pay such member or members their pro rata share of such reserve fund, and at the end of each year shall make a rebate of interest on the amount of dues paid on loans awarded.”

, For some time after this amendment took effect, all seemed to-agree upon its true effect, and each member’s account was accordingly so kept. But now another effect is claimed, and a change in the constitution of the association is attempted. The borrowing members and the non-borrowing members dispute as to the distribution of earnings. This dispute comes from the provision that the association, at the end of each year, “ shall make a rebate of interest on the amount of dues paid on loans awarded.”

The legislative intent was to lessen the interest paid on such loans. The interest-bearing power of the loan is reduced year by year as dues are paid, which, at the final settlement, must be credited on the loan; and so each year the interest earnings of the loan become less. The entire loan earns some interest, and the effect is the same as though the rate per cent of interest were reduced each year. This is not a provision that dues when paid shall be credited on loans awarded ; but the various items of dues paid and earnings credited — from first to last — are put into one amount, and so remain until the share is paid in full, and then such amount is applied to offset the loan, and the loan is settled, if premiums and interest are paid. Shares or stock subscribed for must be paid in full. And when a loan is obtained upon a share, the share is taken out in advance, for which privilege premiums and interest are paid, and then the share may be of no value, but be a burden, and the share-holder must continue to pay his dues until the share is paid, and he must pay the premiums and interest until the loan is settled.

The share is not just equal to the loan thereon, it is more; and when the share is paid — and not before — the whole amount paid and credited on the share is applied to satisfy the loan, not including the premiums or interest paid in another way.

Each member is also entitled to a pro rata share of the reserve fund, whether a borrowing member or not.

The non-borrowing member gets his share in full — all his dues paid in and his ratable share of the earnings. This generally returns him his money with large interest.

The obtaining a loan upon a share does not lessen the amount paid upon that share; and the amended section 3835 does not lessen such amount as a basis for the distribution of the earnings. Neither does that section exclude any part of the payment on a share from such a basis at'each distribution.

The proposed amendment to the constitution of 'the association is not warranted by the amended section-3835, and the equity of the case is with the borrowing members.

There was error in overruling the demurrers : and the demurrer's are sustained.

The injunction asked is made perpetual.  