The South Bend Real Estate, Loan and Investment Company should not be permitted to incorporate under section 22 of the corporations law so long as its questionable stock features are present.

insist upon a return of the money paid by them to the operators. Your question does not relate to the expediency of such a plan of settlement viewed from the certificate holder's standpoint, but only to its legality. Upon the latter point there can be no doubt; inasmuch as the operator of the association is at least in equity and good conscience, bound to restore to his patrons the money he has received from them. His agreement to apply previous pay- ments upon future burial expenses involves no element of in- demnity or insurance, but is a mere promise to account, in a speci- fied way for a sum certain which the patron has paid to the oper- ator. Second. I am of the opinion that burial associations should not collect any further assessments or dues from their members, e-ven to pay for services performed in good faith prior to the ren- dering of an opinion, from this office, relative to the legal status of the burial association contract. Ignorance of the law excuses no one ; and it is simply the misfortune of these parties if through a mere misunderstanding of the law in Indiana they have ren- dered services which that law does not recognize as a proper sub- ject for an insurance contract. To permit these operators to con- tinue collecting assessments or dues, and thus reimburse them- selves for services and materials furnished under their insurance certificates, is in effect to continue the insurance business of these associations. It would amount to enforcing, against their pa- trons, a species of obligation which partakes of the nature of a liability for earned insurance premiums. I am therefore of the opinion that such collections should cease forthwith. ARTICLES OF ASSOCIATION-SOUTH BEND REAL ES- TATE, LOAN AND INVESTMENT COMPANY. December 6, 1906. lIon. Fred A. Sims, Secretary of State, Indianapolis, Indiana: Dear Sir-I am in receipt of your communication of the 28th nlt., submitting the articles of association of the South Bend Real Estate, Loan and Investment Company, together with by-laws thereof, and asking whether this company can incorporate under the voluntary association act of Indiana. The section of said statute which is invoked is section 22, as amended by the Act of 1903 (See Acts 1903, p. 116), reading as follows: "Section 22. To organize companies for the purpose of buying and selling state, county, municipal and all other bonds, of borrowing and loaning money, of buying and sel- in g promissory notes, bills of exchange, accounts. choses in action, fees, and all other evidences of indebtedness, and of buying, holding, owning, mortgaging, leasing and sel- ling real estate and personal property, all in the manner and on a plan to be fully stated in such articles. Such as- sociations shall not be authorized to do a general banking or trust business." As stated in the articles of incorporation of this association, the purpose of its organization is thus announced: "This corporation is organized for the purpose of buy- ing and selling promissory notes. bills of exchange, ac- counts, fees and all evidences of indebtedness and buying and building homes, buying and selling real estate and per- sonal property; also borrowing and loaning money, and that all of the iransactioiis abore ath!jriZed inay be cosininmaled either by the principal sum involved in one payment or upon the receiving and disbursement of i)nstallmenl payments to the amount which may have been purchase / or conveyed, loaned or borrowed and to do all thin1gs incidcntal to the proper carrying out of said purposes." Sections 1. 5, 6 and 7 of article 2 of the by-laws of said asso- ciation read thus: Section 1. The stock of the company shall be divided into 600 shares of full earning stock, and 400 shares of cash or term maturity stock, the par value of the share will be $50 each, for which the purchaser may elect to pay the full amount in cash or by monthly or quarterly payments: the monthly payment being $1 per share.' Section 5. To 6each stockholder subscribing for stock in any class and wishing to pay for the same by monthly or quarterly installments payments, there will. be a pass baok issued in which all payments will be credited by the secretary and receipted therefor, and when the total pay- ments, together with earnings (if not taken in cash) shall reach the par value of stock, the pass book will be recalled and a certificate will be issued fully paid." Section 6. Collateral Loans.--The stock or pass book [3-193951 payments of any stockholder niav be placed with tie com- pany as collateral security for a loan to the extent of 80 per cent. of the full value of stock or pass book value. Section 7. Arrearages and Fines.-In the event any stockholder shall be in arrears in his monthly or quarterly payments a fine of ten cents per share per month may be assessed against the stock, and should any stockholder's payments or fines remain unpaid for a period of six months the committee of nianagement may appraise the stock, and if all payments, together with fines, are not paid within thirty days, said committee of management may sell the stock to other members .of the corporation to the highest bidder and credit the delinquent member with its sale price or value, less the charges and penalties. An examination of the above articles and by-laws reveals that the plan upon which this company proposes to dispose of its stock, closely -approaches the method of business pursued by building and loan associations. Among the objects *of the incorporation are the building of homes, the selling of real estate and the loan- ing of money. There are tavo classes of stock created; either class may be paid for by installments, payable monthly or quar- terly; a pass book is issued to subscribers: installments are cred- ited therein as soon as paid; earning's are also to be credited, unless the same are paid to the stockholders in cash: and the stock matures when the payments of installments, together with earnings, aggregate the par value of the stock. Loans are pro- vided for to be secured by the stock or pass book as collateral. Fines, charges and penalties for delinquency in paying the install- ments upon the stock are prescribed, and forfeiture and sale of stock form additional features of the plan. The voluntary association act provides for the incorporation of a variety of companies of the simpler sort, but it does not auth- orize the organization of building and loan associations or similar institutions. Other statutes cover the latter class of subjects, and surround their management with safeguards which are not se- cured by the voluntary association act or by the by-laws submit- ted by the company in question. Any attempt -upon the part of ineorporators to e-vade the saluatary provisions of the building and loan association enactments by incorporating under the voluntary association act should be discouraged. That such attempt is here being made, is evident from the above sections of the by-laws and articles of incorporation. A further objection to the method of business sought to be adopted arises front section 6, supra, which in effect permits 80 per cent. of the capital of the company to be withdrawn by tile stockholders, who thus take out, \vith one halod, what they ha.ve paid into the treasury of the association with the other. The only difference in the status of the borrowing member and the non- borrowing member who has not paid up his stock in full, is that in the former case the company has his pass. book as collateral. Such a subterfuge might work grave injustice to creditors who are assured that all or substantially all the capital stock is paid up in full: when, as a matter of fact, the paying stockholders are bor- rowers to the extent of 80 per cent. of their holdings. T]'his ar- rangement is highly objectionable. As stated in 2 Thompson on Corporations, section 1585: .The capital stock of a corporation being a trust fund for the security of creditors, this trust can not be defeated by a sinodafed pa/meai of the stock subscription, nor by anything short of an actual payment in good faith. The assets of a company can not be applied to return to the shareholders what they have or ought to have paid upon their shares. An arrangement by which the stock is nom- inally paid and the money immediately taken back as a loan to the stockholders is a, device to change the debt from a debt impressed with the character of a trust to an ordi- nary loan, and is not a valid payment as against creditors of the corporation, though it may be good as between the company and the stockholder." For the reasons above set forth, my opinion is that the South Pend Real Estate, Loan and Investment Company should not be pernitted to incorporate tinder section 22, supra, so long as the questionable features, above indicated, constitute a part of their plait of business. RAILROADS TRANSFER O EQlUIPM\IENT. December 10, 1906. lion. Charles B. Riley. Secretary Railroad Commission of Indiana: Dear Sir-In vour communication of the 5th inst., you submit Ilie, following inquiry: "What authority exists in the court to compel the Southern Indiana Railway Company to load its equipment