TITLE XVI. [Old title XVI repealed and new title XVI substituted March 23, 1907; stats. 1907, p. 923.] Building and Loan Associations. (See, also, "Building and Loan Commissioners," statutes at large, Appendix.) SEC. 633. Formation, powers, and organization. 634. Capital stock. 639. 640. Arrears in payments-Default-Forfeitures. 647. Investment in and loans upon bonds. 648. Definition of building and loan association. 648a. Formation of building and loan associations. Reincorporation of existing associations. Formation, powers, and organization. § 633. Building and loan associations, as hereinafter in this title defined, shall have power to receive money and accumulate funds to be loaned, and to loan the same to their shareholders, investors and others; to permit shareholders and investors to withdraw part or all of their payments, investments or stock deposits, and to prescribe the terms and conditions of such withdrawal; to cancel shares of stock, the payments on which have been withdrawn; to receive deposits of money and to execute certificates therefor, which must specify the date, amount, rate of interest, and when the principal and interest are payable, and also the withdrawal value thereof at the end of each year; to borrow money for the purpose of making loans and of paying withdrawals and maturities; and shall have such further powers as may be specifically set forth under this title. Every such corporation hereafter formed, in setting forth the purposes for which it is formed, shall state, in its articles of incorporation, that it is formed to encourage industry, frugality, home building, and savings among its shareholders and members; the accumulation of savings; the loaning to its shareholders and members of the moneys or funds so accumulated, with the profits and earnings thereon, and the repayment to each, of his savings and profits, whenever they have accumulated to the full par value of the shares, or at any time when he shall desire the same or when the corporation shall desire to repay the same, as may be provided in the by-laws; and shall also state that it is formed for all the purposes specified in this title. Enacted March 23, 1907; stats. 1907, p. 923. VIII Cal. App. Dec. 314. Capital stock. § 634. The capital stock of every such corporation shall be divided into shares of the matured or par value of one hundred or two hundred dollars each, as provided by the articles of incorporation, and shall be paid in by the stockholders in the manner provided by the by-laws. All such payments shall be called dues. The shares shall be issued in such amounts and at such times as the board of directors shall determine, and certificates of stock shall be issued to each shareholder on the first payment of dues by him. Shares pledged as security for the repayment of a loan shall be called pledged shares, and all others, free shares. All stock matured and surrendered or canceled, shall become the property of the corporation and may be reissued. The capital stock shall consist of the accumulated dues together with the apportioned profits of the corporation. Any such corporation shall have power, by its by-laws, to impose and collect a fine from each stockholder, not exceeding five per cent of the defaulted amount, for every neglect or refusal to make his payment when payable. Such fines shall not be cumulative. Every such corporation shall also have power, by its by-laws, to charge an entrance or withdrawal fee, for each share of stock it may issue, not exceeding one dollar on each share, and also to charge a transfer fee, not exceeding ten cents on each share, all of which fees shall be accounted for by the corporation like other funds of the association. No other fee, charge or deduction shall ever be made, or permitted to be made against any shareholder, or against any of his shares hereafter issued, or the dues paid in thereon for the purpose of creating a fund to be used in the payment of current or running expenses. The capital stock may be issued in any or all of the following forms: installment stock, paid-up stock, and guarantee stock. Installment stock shall be stock on which the member or holder must pay to the corporation on each share held by him, dues in such amounts and at such times as the by-laws may provide and on which the payment of dues must continue on each share until, with the profits allotted thereto, it reaches its matured value or is withdrawn or canceled. Such stock may be issued in series, and when so issued, payment of dues on shares in each series shall commence with the issue of shares in such series. No share of a prior series shall be issued after the issue of shares of a new series, except by way of transfer. Paid-up stock shall be stock for and upon which the owner shall have paid to the corporation, the full par value thereof in cash at the time of subscription therefor, and upon which he shall be entitled either to full participation in the net profits of the corporation, or to an agreed rate of interest or dividend to be specified in the stock certificate, but not to exceed six per cent per annum. All such stock shall be issued under such regulations as may be provided in the by-laws and fully set forth in each certificate. Guarantee stock shall be stock, provided by the by-laws, to be set apart and sold as a fixed, permanent or guarantee capital. When any such stock has been once so set apart, sold and issued, it shall thereafter remain as a fixed, permanent and guarantee capital, and shall be subject to all the conditions and liabilities attaching to the paid-in capital stock of other classes of corporations. Such guarantee stock shall protect and guarantee all other stockholders and creditors against any loss, and when once paid it must be kept unimpaired. Corporations specified in this title, issuing guarantee stock, may provide in their by-laws that a majority of the board of directors shall be selected from the holders of such stock. Enacted March 23, 1907; stats. 1907, p. 924. Retiring free shares. § 635. The directors may in their discretion, under the regulations prescribed by the by-laws, retire any free shares of stock, other than those of the guarantee stock, by enforcing the with drawal thereof, but whenever the withdrawal of any shares is to be enforced, the holders thereof must be paid the amount actually paid in, and the full amount of earnings at the date of retirement; provided, that shares of installment stock shall not be forced out until after they shall have become four years old. Enacted March 23, 1907; stats. 1907, p. 925. Maturity of stock. § 636. When any stock shall have reached its matured value, payment of dues thereon shall cease. Borrowing stockholders whose loans are fully paid shall have their securities released and returned to them. Holders of free shares of stock shall be paid the matured value thereof out of the funds of the corporation, with interest at such rate as the by-laws shall provide, from the time the board of directors shall declare such shares to have been matured, until paid; but at no time shall more than one half of the receipts of the corporation be applicable to the payment of matured shares without the consent of said board. The order of the payment of matured shares, if not otherwise determined by the by-laws, shall be in the numerical order of issuance. Enacted March 23, 1907; stats. 1907, p. 925. Loans-Prohibitions-Penalties. § 637. Loans may be made on such terms and conditions as may be prescribed by the board of directors or the by-laws. Loans may be made for a definite time on the installment plan. The number of installments in which a loan with agreed interest is to be repaid, must be stated in the note or obligation evidencing the loan, and when the payments have been made in accordance with the contract, the borrower shall receive a release of the security given by him. It shall be unlawful for any director or officer of any corporation governed by this title, directly or indirectly, for himself, or as a partner or agent for others, to borrow any of the funds of such corporation, and any officer or director violating the provisions of this section shall be guilty of a felony. Any officer or director of any such corporation who consents on behalf of such corporation to make a loan to any officer or director of such corporation shall be guilty of a felony, and shall also be personally liable to the corporation for the full amount thereof. It shall be unlawful for any building and loan association to loan any of its funds upon any of its own guarantee stock as security. Any officer or director of an association who shall make any such loan for and on behalf of any such association shall be personally liable to the corporation for the full amount thereof, and shall also be deemed guilty of a felony. It shall be unlawful for any such corporation to invest any of its funds in, or loan any of its funds upon, any mining shares or mining stocks or the stocks or bonds of any corporation, except as in this title provided. Every officer or director who, on behalf of any such corporation shall make any such investment or loan, or who shall consent thereto, shall be personally liable to the corporation for the whole amount expended by the corporation in such investment or upon such loan, and shall also be deemed guilty of a felony. Enacted March 23, 1907; stats. 1907, p. 926. Interest-Securities-Repayment of loans. § 638. The board of directors may fix from time to time the rate of interest on loans. For every loan made, a note or obligation, secured by a first mortgage or deed of trust upon unincumbered real estate, shall be given, accompanied by a pledge to the association of shares of stock, as collateral security for the repayment of the loan, the matured value of which shall equal the amount of the loan, except that there need be no such pledge in loans made to others than members; or, in lieu of a mortgage or deed of trust, there may be pledged to the association, for the payment of the loan, free shares, but any such loan must not exceed ninety per cent of the withdrawal value of such shares under the by-laws, at the time of such borrowing. At the discretion of the board of directors, a borrower may repay, at any time, the loan with all interest and arrears thereon, upon the surrender of the shares pledged to secure the loan. Enacted March 23, 1907; stats. 1907, p. 926. Arrears in payments-Default-Forfeitures. § 639. Whenever any non-borrowing member shall be six months in arrears in the payment of his dues upon free shares, the secretary may give him notice thereof in writing, and a statement of his arrearages, by mailing the same to him at his last post office address given by him to the association; and if he shall not pay all arrearages within two months thereafter, the board of directors may, at their option, declare his shares for |