The record-union. [volume] (Sacramento, Calif.) 1891-1903, 1899-03-01
MUST RETURN SECURITIES.
ONION BUILDING AND LOAN
DECISION.
Sixth Stock Series Illegally Paid
The Bank Must Give Back
the Collatera1s.

According to Judge Buckles OF
Solano County, who presided at the
several weeks trial of the case
OF Receiver T. w. O'Nel OF the
Union Building and Loan Assocl-
alton against the National Sank
Of d. 0. Mills & Co., for the recovery
OF securities pledged to the bank by the
Directors of the association, these Sc
curities were illegally pledged, and
must be returned to the association.
Judge Buckles also holds that the
Directors had no power to borrow
money with which to pay off the sixth
series of stock in 1896. They couiu
pay such premiums only from Iul4dS
that had accumulated and were IN It's
possession at the time, or on the OASIS
of the cash value of its securities.
The bank however,, will have a claim
against the association for the balance
due it, but must take it's place among
the other creditors of the association.
Following is
JUDGE BUCKLES DECISION.
Inasmuch as l understand that this
case will be appealed to the Supreme
Court, no matter what the decision
here may be, shall not take the
trouble to set out all the grounds for
the conclusions reached. l have care
fully considered the authorities pre-
scented, so far as such authorities have
been accessible to me, and have reached
my conclusions from the weight of au-
thority, as 1 understand it to be-
Testimony as to the adoption of by
laws was properly admitted. The evil
dence received pro forma as to what
took place before the Board of Direct
ors of the Union Building and Loan
Association will be permitted to stand
as evidence in the case, for the purpose
of showing what action the board took
toward paying off the sixth series and
borrowing money for that purpose.
The bylaws were properly adopted,
and, by law XIV, were in force at the
time of the stockholders meeting IN
December, 1895, and at the time the
board directed the borrowing of the
money with which to pay off the sixth
series, and this furnished the rule, ana
in connection with Section b4O, civil
Code, as then in force, the only rule
for maturing and paying off the same.
and borrowing money for that purpose.
Bylaw XIV. is as follows:
when it is ascertained that there is
sufficient capital in the treasury-Val-
uing the securities at their actual cash
value-a meeting of the stockholders
shall be convened, and a, distribution OF
the money in the treasury SHAH he
made, and the holder of each share
shall receive the sum of 500 therefor,
or it's securities to that amount, and
liens of record shall be certified; pro-
vided that no stakeholder shall be en-
titled to have collateralS returned. Sc
curities released or liens satisfied, until
all dues, fines, interest, premiums or
other Indebtedness to the association
is fully paid"
The evidence shows that there was
no money in the treasury, and that the
securities were not valued at their casn
value but rather at their face value.
and in some instances with delinquent
and uncollectable interest and costs
added. while the real estate in almost
every instance was, if valued at all,
put in at which it cost the association,
which was vastly more than 1t was
then worth.
Not having followed the directions in
the bylaw, the corporation had no
power to pay off the sixth series IN
February, 1896.
The statute in force, SO far as the
Union Building and Loan Association
is concerned-when the money was
borrowed from D. o. Mills & Co.-was
Section $40, Civil Code, and reads as
follows:
ANY such corporation may borrow
money for the purpose of carrying out
its objects, and may give as security
therefor its shares or mortgage upon
its real estate
It is a well-settled rule that corpora
lions have no power except such as are
given them by the act of incorporation,
the statutes of the State and such IN
cidental powers as are necessary 10
the carrying out of the power granted,
and that if the manner and way OF eH-
ercising power or right granted Is
specifically pointed out by the act or
articles of Incorporation, or the stat
ute. then all other ways are prohibited.
1t will therefore be seen that the cor
poration had no power to pledge It's Sc
curities as it attempted to do. as Sc
curity for the $4,000 borrowed of the
defendant with which to pay of the
holders of the sixth series.
The defendant had been elected
Treasurer of said corporation, knew OF
Its election. kIltN II W do liCio Ore 49,.
published to the world, as Treasurer
of the Union Building and Loan Asso-
citation; accepted the office, and acted
as such Treasurer, and was therefore
chargeable with knowledge of the lie
gal acts of the Boards of Directors IN
valuing its securities and its real prop
erty, and with full knowledge OF the
power of the association to borrow
money, and what it could give as Sc
curity for money borrowed.
The Association having had no power
to pledge its securities, the securities
in controversy in this suit must be re-
turned to the receiver. But, since the
association and it's shareholders re-
cedved the benefit of the money bor-
rowed. and have not returned the whole
thereof to the defendant (bank). the
notes given for the $4,000 will not be
Cancelled, but remain as evidence Of the
debt due from the association to the