§§ 378, 388.

Savings and loan associations.

L. 1923, ch. 34.

to be known as a safe deposit company. Such persons shall subscribe and acknowledge and submit to the superintendent of banks at his office an organization certificate in duplicate which shall specifically state:

1. The name by which the safe deposit company is to be known. 2. The place where its business is to be transacted.

3. The amount of its capital stock, and the number of shares into which such capital stock shall be divided, which capital stock shall amount to not less than :

(a) One hundred thousand dollars and not more than two million dollars if the place where its business is to be transacted is in a city the population of which is one hundred thousand or more;

(b) Ten thousand dollars and not more than two million dollars elsewhere in the state.

4. The names and places of residence of the incorporators and the number of shares subscribed for by each.

5. The term of its existence, which may be perpetual.

6. The number of its directors, which shall not be less than five nor more than thirteen, and the names of the incorporators who shall be its directors until the first annual meeting of stockholders. The incorporators named as directors must possess the qualifications of directors as to citizenship and residence specified in section three hundred and twenty-five of this article, and the certificate shall recite that such qualifications are possessed by such incorporators.

Such certificate may provide for the manner in which the stock of the corporation may be transferred and for the number of directors necessary to constitute a quorum. (Amended by L. 1923, ch. 77, in effect March 23, 1923.)

§ 378. General powers.-5. To assign to the land bank of the state of New York bonds and mortgages and other securities owned by the association as security for the payment of debenture bonds issued for its account; to guarantee the payment of such debenture bonds; to exercise such other powers as may be conferred upon member associations of such land bank; and to perform such duties and obligations as may be lawfully required of such member associations. Such member association may also, irrespective of the assignment of bonds and mortgages to the land bank as security for the payment of debenture bonds as aforesaid, furthermore sell and assign to said land bank bonds and mortgages owned by said association when the same are of the character made legal for the investments of savings banks under subsection six of section two hundred and thirty-nine of the banking law, and may guarantee to said land bank payment of the interest upon said bonds and mortgages and the principal thereof at maturity. (Subd. 5 amended by L. 1923, ch. 34, in effect March 12, 1923.)

§ 388. Power to borrow; restrictions thereon.-Any savings and loan

L. 1922, ch. 357.

Savings and loan associations.

§ 395.

association, except as hereinafter provided, may borrow money for a term not to exceed one year, if:

1. It has been authorized so to do by the vote of a majority of its board of directors, taken by ayes and nays and recorded in its minutes.

The aggregate of the money borrowed by it and the prior or underlying mortgages, liens or incumbrances upon the real estate upon which it holds mortgages or to which it has taken title, does not exceed twenty per centum of its accumulated capital, or two thousand dollars, if its accumulated capital does not exceed ten thousand dollars. This restriction shall not apply to money obtained from the Land Bank of the State of New York through the issue of bonds on its account and secured by the assignment of bonds and mortgages or other securities by such association. Whenever any such association shall have pledged and assigned to the Land Bank of the State of New York, in accordance with the provisions of section four hundred and twenty-six of this chapter, bonds and mortgages having a present value, after all offsets and credits that would be allowed in case of their payment, of fifty per centum or more of the aggregate present value, ascertained in like manner, of all the bonds and mortgages owned by such association, the power of such association to borrow money shall thereafter cease until the present value of the bonds and mortgages so pledged and assigned, as so ascertained, shall be less than fifty per centum of the aggregate present value of all of its bonds and mortgages as so ascertained, and whenever the present value of the bonds and mortgages so pledged and assigned, as so ascertained, shall be less than fifty per centum of the aggregate present value of all its bonds and mortgages, as so ascertained, but shall equal or exceed twenty-five per centum of such aggregate present value of all its bonds and mortgages, such association shall not thereafter have power to borrow any sum of money, if, as the result of such borrowing, the aggregate of the money borrowed by it and the prior or underlying mortgages, liens or incumbrances upon the real estate upon. which it holds mortgages or to which it has taken title, exclusive of money obtained from such land bank, will exceed ten per centum of its accumulated capital. Any such association, however, may accept from its members advance payments of dues upon its installment shares and advance payments of interest and premium upon its loans; but such payments shall not be accepted in advance for a longer period than one year, nor shall the interest paid upon such advance payments exceed the rate of six per centum per annum. (Amended by L. 1916, ch. 139 and L. 1922, ch. 357,

in effect March 30, 1922.)

§ 395. Net earnings credited for dividend purposes; credits to guaranty fund and undivided profits; dividends to shareholders.-No savings or loan. association shall declare, credit, or pay dividends upon the accumulations. upon any class of shares for a longer period than that covered since such shares were issued; provided, however, that payments made upon shares

§§ 397, 403.

Savings and loan associations.

L. 1921, ch. 76. not later than the tenth business day of the month commencing any dividend period, or the third business day of the month beginning any quarterly period, may have dividends declared and credited upon such payments for the whole of the dividend period, if not withdrawn before the end of such period. (Paragraph added by L. 1921, ch. 75, in effect March 16, 1921.)

§ 397. Withdrawal of free shares; notice thereof and withdrawal value.— If any member of a savings and loan association shall die, leaving unpledged shares in said association, of which the withdrawal value shall not. exceed five hundred dollars, and no executor of his last will and testament, or no administrator of his estate shall be appointed, the savings and loan association of which he is a member, upon receiving a waiver from the New York state comptroller, may in its discretion, pay the withdrawal value of his shares to his widow, or if the decedent was a married woman, to her surviving husband, next of kin, funeral director, or other creditor who may appear entitled thereto. As a condition of such payment, the savings and loan association may require proof by affidavit as to the parties in interest, the filing of proper waivers, the execution of a bond of indemnity with sureties, and a proper receipt and acquittance for such payment, by the person to whom the payment is made. For any such payment made pursuant to this section the savings and loan association shall not be held liable to the decedent's executor or administrator thereafter appointed, unless the payment shall have been made within one year after the decedent's death, and an action to recover the amount shall have been commenced within one year after the date of payment. (Paragraph added by L. 1921, ch. 76, in effect March 16, 1921.)

§ 403. Change of location.-Any savings and loan association may make a written application to the superintendent of banks for leave to change. its place of business to another place in the same or adjoining county. The application shall state the reasons for such proposed change, and shall be signed and acknowledged by a majority of its board of directors. If the proposed place of business is within the limits of the town, village, borough or city in which the place of business of the association is located, such change may be made upon the written approval of the superintendent; if beyond such limits, notice of intention to make such application, signed by two principal officers of the association shall be published once a week for two successive weeks, immediately preceding such application in a newspaper published in the City of Albany in which notices by state officers are required by law to be published, and in a newspaper to be designated by the superintendent, publised in the county in which the place of business of such association is located. If the superintendent shall issue a certificate authorizing the change of location, as provided by section fifty of this chapter, the association shall cause such certificate to be published

L. 1921, ch. 78.

Credit unions.

§§ 409-a, 450.

once in each week for two successive weeks in the newspapers in which the notice of application was published. When the requirements of this section shall have been fully complied with, such association may, upon or after the day specified in the certificate, remove its property and effects to the location designated therein, and thereafter its place of business shall be the location so specified; and it shall have all the rights and powers in such new location which it possessed at its former location. (Amended by L. 1921, ch. 352, in effect April 30, 1921.)

§ 409-a. Pensions for officers and employees.-A savings and loan association may, in the discretion of its board of directors, retire any officer, clerk, or other employee who shall have served the association for a period of thirty years or more, or who shall have served the association for a period of twenty years or more and shall have become physically and mentally incapacitated for his position, or who shall have served the association for a period of twenty years or more, and shall have attained the age of sixty years. Any person retired from service pursuant to this section may be paid in equal monthly installments at the rate of not exceeding two per centum of his average annual salary for the three years immediately preceding the retirement for each year of service in the association; but the maximum annual amount paid shall in no case exceed sixty per centum of such annual salary. (Added by L. 1921, ch. 78, in effect March 16, 1921.)

§ 450. Incorporation; organization certificate.

General statute against usury inapplicable to "credit unions"; validity of contract; interest in excess of one per cent. per month; discount; when "credit union” can recover amount actually advanced.-The legislature having provided for the creation of "credit unions" (Banking Law, § 450), a new kind of corporation, with power to make loans to its own members at rates not exceeding one per cent. per month, without providing any express prohibition against or penalty for exacting a greater rate of interest than the corporation was empowered under the statute to exact, it must be held that the legislative intent was to make the general statute against the exaction of usury inapplicable to the contracts of a "credit union" and that the validity and effect of such contracts should be tested by the general rules which govern the making and enforcement of corporate contracts. The defendant C., one of the shareholders in the plaintiff, a duly incorporated "credit union," upon being told that it would loan him $2,500, he as principal and the other defendants as sureties signed a written instrument by which he agreed to pay to the order of plaintiff the sum of $2,500 in twenty-five installments of $100 per week. Upon the execution of the instrument plaintiff paid to C. the sum of $2,350, having deducted from the amount of the loan $150 as discount or interest paid in advance at the rate of twelve per cent. per annum. C. had paid four installments of $100 each he defaulted. In an action upon the written instrument to recover the unpaid balance the defendants pleaded usury and the facts being undisputed a verdict was directed in their favor. Upon reversing the judgment entered on the verdict and ordering judgment in favor of the plaintiff for the sum of $1,950 with interest from the date of the commencement of the action, held, that the defendants having received consideration under

After

§§ 453, 454.

Credit unions.

L. 1923, ch. 701.

a contract which contained a provision which they themselves were bound to know the corporation had no right to insert, should not be permitted to retain the consideration on the plea that the corporation had no power to make the contract or to say that it was illegal; but inasmuch as the corporation retained moneys from the face amount of the loan as a discount or as interest payable in advance, which it had no power to exact, the defendants could not be required to repay to plaintiff more than they received. Great Eastern Credit Union v. Cooper (1922), 120 Misc. 79.

§ 453. General powers.-5. To lend money to its members upon such terms and conditions as the by-laws provide and as the credit committee shall approve. A credit union shall have power, either to charge interest upon any such loan at a rate not exceeding one per centum per month, or, in the alternative, to deduct interest in advance on any such loan at a rate not exceeding five and nine-tenths per centum per annum, reckoning the term for which said loan has to run. The rate of interest, so deducted, shall not be deemed to have been increased by reason of the fact that said loan is made repayable in uniform monthly or weekly installments. In either case, the said interest rate shall be inclusive of all charges incident to the making of such loan. The term "year," or proportionate part thereof, when used to denote the period for which a loan, repayable in equal weekly installments, is made, shall be deemed to mean fifty weeks, or proportionate part thereof. When a borrowing member of a credit union, who is not in default in the repayment of his loan, shall voluntarily repay the same prior to the time when the final payment thereon is due, the credit union shall refund to him the pro rata unearned portion of the interest previously deducted. (Subd. 5 amended by L. 1915, ch. 294 and L. 1923, ch. 701, in effect May 25, 1923.)

§ 454. Limitations upon powers.-No credit union shall: 1. Pay any commission or compensation for securing members or for the sale of its shares.

2. Make any loan in excess of fifty dollars unless security therefor is taken. The term "security" within the meaning of this subdivision shall include an endorsed note. But when a member borrows an amount less than the par value of his fully paid shares and deposits and when he pledges or assigns such shares and deposits as security for the loan, his unendorsed note payable to the credit union may be accepted as security therefor.

3. Impose a fine, in case of failure of a member to make payments on shares, exceeding two per centum per month or fraction of month on amounts due, except that a minimum fine of five cents per month or fraction thereof may be imposed.

4. Permit any director, officer or member of the credit committee or supervisory committee to borrow directly or indirectly or become surety for any loan or advance made by the corporation, unless such loan shall have been approved at a regularly called meeting of the members of the corporation by a majority vote of those present, and the notice of such