The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1893-04-06
PAID-UP BUILDING STOCK.
Further Reasons for Believing The Attorney
Generals Recent Opinion Is Erroneous.

Do the Editor of the Indianapolis Journal
Attorneys who have given the subject
n thought at all will without doubs
radically disagree from the Attorneys gen.
erals recent opinion in regard to the taxa
ton of so-called paid-up stock in building
associations. Although the legal aspect OF
the matter is all that need be examined,
yet. In passing. It might we'll be said that
from the standpoint of equity and justice
there Is much IN favor of the proposition to
not tax this class of assets. The fact that
building associations. in almost every in.
stance. pay but Q very small rate of in.
terest on this kind of stock 10
what enables them to loan money TO
rate. and on the most favorable terms. The
legal results of the Attorney-Reneraps argu-
ment is that the very moment o running
stakeholder pays ND his stock. that is. when
he has paid dues, which. ADDED TO hiA
dividends. amount to the face value of his
stock, he Is no longer q bona fide share
holder, but q creditor OF the association.
and the latter q borrower from him. 10
does not matter whether the face OF the
stock has been paid at one time. or in q
hundred or o thousand INSTRUMENTS. The
result is the same, and. In tue
opinion of the Acknowledgment.
he ceases to be q snarehoiaer.
nor any avoidance of the result to which 10
leads. TO say that not until a written cer-
~tificate is accepted would such Q stock
holder cease to become such. The cer-
titicate is only evidence of the existing fact
and would not necessarily alter or forfeit
any right which the stockholder thereto
fore possessed. 1t Is impossible TO note the
many undesirable results to which such q
holding would lead If adopted by the
Supreme Court. / beg to cite only one.
Many of the associations are run on the
serial plan. Suppose all the stockholders
in one series have paid mp their
stock, and the book value is the face
value of the stock. The stockholders OF
this series are entitled to the face value
of the stock in money, and. therefore,.
demand it of the treasurer of the associa-
ton. such q contingency probably has
never been provided tor and the money
cannot all be paid at once. The officers OF
the association could tell all such parties
that they were no longer stockholders
In the association; that they could not
vote at any ~stockholders' meetings and
the same; that as soon as the managers OF
the corporation saw hit, provision would
be made to pay them and until such time
they would not be entitled TO share in any
of tho dividends or earnings of the CON-
pany. All such persons are no part
of the corporate body. and the only comfort
left them is to sue the association
for money had and received by
it and await the law delays without even
the hope of l cent of dividend, however
much the association might be earning.
But. with all due respect to the Attorney
general, this is not the law. He IS WRONG
in his premise. and, therefore. wrong In the
conclusion. The courts will hold this to be
the law in this State. as 1t has been held
elsewhere: Whether the s~tockholder shall
pay the face value OF bis stock at one time
or in payments. weekly or otherwise. he re-
mains q stockholder in the association until
time sharing in the earnings the same Is
other stockholders. See Endlich's Law on
Building Associations, Sections 40. AZ. 4S.D
1t is also equally true that any such
stakeholder. having paid MP his stock, may
agree that he will allow his money To re-
main In the associations hands indefinite
ly, or at his will. and the association may
certainly agree with such a shareholder
that 1t will allow lii his proportion of The
net earnings or dividends. not TO exceed q
certain rate. The possible maximum divi-
dend may be agreed upon. To make this
position plain: the stockholder may say
to the association: If your dividend ex-
ceeds or EQUALS 6 per cent. interest you
shall paw me no more than that rate: il
your dividend is less than o per cent, you
shall q me the dividend rate only" The
shareholder. in any event.. VIII not get
more than 9 per cent. dividend; he may get
less. This Is certainly q contract which
the association could make with it's share
holders. for there is a consideration 10 sup
port it, and a benefit In It which may ex.
tend to oil other shareholders. Ii the divi.
dend is 10 per cent. the association would
make 4 per cent. ~ the contract.
The proposition of the Attorney general
to tax paid-up stock in building associa.
tions. on the ground that holders of such
stock are not stockholders. but are lenders
to the association. Is not, therefore. sup
ported by the law. and is also I'm direct
conflict with the opinion of the Attorney
general as given out one year ago. In that
opinion he made a distinction between
| paid.up stock and money borrowed by an
association. holding that the latter was
taxable. but that the former was not.
KoKoMo, Ind. April 5. ATTORNEY.