Ottumwa tri-weekly courier. [volume] (Ottumwa, Iowa) 1903-1916, 1904-06-11
RECEIVER WINS IN LOAN
and BUILDING CASES

~ Af.lo oo.Oo
l. -. 1884 1915
M 1928
Figured upon this basis if the total
amount over-paid and now held to be
due on the shares prematurely matured
there would be formed fund of ap-
proximately $4,000. an amount suf-
ficient to pay up all the Indebtedness
and the obligations of the association.
The court directs that the fund pro-
duced by these judgments be first call
ed upon to discharge all the debts and
| obligations. Ii this fund is not of suf-
| ficient amount the court finds that all
shareholders withdrawing after the as
ISOLATION became insolvent during the
year 1898 and later will have
to refund all dues paid them
excepting such dues as were
paid after the association became in
solvent. This is so held because in
solvency of the association not only
terminated the right of members to
withdraw or to have stock matured.
but also terminated the right of the
association to collect further dues up
on it's stock
The association is found to have be-
come insolvent during the year 1898
and was insolvent when it matured SER
les X on April II, 1898. The associa-
ton, it is held, had no right to mature
the stock at that time and the court
holds that all mem bers who had stock
matured and paid after that date will
have to refund proportionately an
amount sufficient to make good all
debts and obligations OF the associa-
ton not paid by the first fund to be
collected from the shareholders in the
series from A to M This sum is not
to be resorted to nor execution issued
for it until the first fund shall have
been exhausted
The court holds that the exhaustive
| investigation that has been made dur
ing the trial has proven that had the
| overpayments not been made to those
whose shares in series from A to NJ
We're prematurely matured the associa-
/ ton would be solvent and in good con-
dition at the present time and that it
| would be able to meet every obligation
and Indebtedness.
The court holds that there is no evil
.dence to justify the charge of fraud
| that there is nothing to indicate that
/ the officers did not exercise reasonable
4 diligence in handling and conducting
the business but that the business was
i conducted on mistaken theory.
The court expresses the opinion that
one of the most fatal mistakes in the
Il conduct of the business was the de-
cision to borrow money and issue stock
| upon it. By this plan the association
/ hoped to borrow money from outside
sources at low rates of interest and
/ loan it in the course of its own bust
ness at high rate, thereby gaining
| the difference in the rates Of interest.
/ This difference amounted to but very
small amount and while it increased
| the total Of stock and the volume OF
/ business it did not increase in proper
,proportionate rate the profit in the
business. 1t amounted simply TO what
| is commonly called watering the
1 stock"
History of Case.
The Ottllmwa Loan and Building as
sociation was incorporated in Febru-
airy 1878. Its object was stated in the
articles of incorporation to be "to as
sist its members in procuring real
property by loaning them its funds on
4 good security" The capital stock was
1 fixed at S1,000.000 which was divided
1 into shares of 5000 each.
The plan upon which this association
| conducted its business was to issue
not to exceed 500 shares of stock in
each year and the stock issued during
each fiscal year was known as Sc
ries and was designated by one of the
| letters of the alphabet In series A
more than 500 shares were issued. but
| in the subsequent series the full num-
/ Der was not issued. The stock was
paid for by the members in monthly
installments of 81 for each share until
1891 and stock issued in 1891 was paid