Attorney Gen. v. Pitcher

• Decision Date: 17 June 1903
• Citation: 67 N.E. 606,183 Mass. 513
• Parties: ATTORNEY GENERAL v. PITCHER et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

183 Mass. 513

67 N.E. 606

ATTORNEY GENERAL

v.PITCHER et al.

Supreme Judicial Court of Massachusetts, Suffolk.

June 17, 1903.

Case Reserved from Supreme Judicial Court, Suffolk County; John W. Hammond, Judge.

Suit by Herbert Parker, Attorney General, against Allen S. Pitcher and others. Case reserved, and information dismissed.Fredk. H. Nash, for the Attorney General.

Hallowell & Hammond and Wm. M. Stockbridge, for defendants.

KNOWLTON, C. J.

This is an information in equity by the Attorney General to enjoin the defendants, as copartners under a declaration of trust, from doing the business of issuing and selling certain obligations or contracts, under the name of the New England Home Buyers' Association. The declaration of trust shows that the four defendants agreed to carry on this business through two of their number as trustees, who are to have the management of the business, and to hold the title to all the property that comes into their hands. So far as appears, neither of the defendants put any capital into the business. The object of each of the obligations or contracts to be issued is, professedly, to provide the purchaser with a fund ‘to purchase a home, farm, or other real estate, or to discharge existing incumbrances thereon, or to pay for improvements thereof.’ They are to be numbered in order, one number being required for each $1,000. For each $1,000, the purchaser is to pay an application fee of $3, and subsequent payments of $2.50 monthly, from each of which monthly payments $2 is to be appropriated to the home fund, 35 cents to the expense fund, and 15 cents to the contingent fund. On each accumulation of $50 in the home fund from these monthly payments by the purchaser, and by parties to other like agreements which have not lapsed, or upon a sufficient accumulation in the home fund to assure the payments to be made upon the vesting of one interest, the lowest numbered fully paid up $1,000 interest which is not then a vested interest is to be deemed a vested interest, if the association has then discharged all obligations then due on outstanding vested interests. The holder of such vested interest is thereupon entitled to the benefit of monthly payments of $50, without interest, ‘for the period of twenty months, to be paid out of the home fund by the association to the vendor of the property proposed to be purchased, or in case of incumbrances upon property to the person holding the lien thereon, or in case of improvements of property to the legal creditor therefor.’ After the acquisition of each vested interest by the purchaser, he agrees to pay $5.50 per month on each $1,000 mentioned in the agreement, until, including the previous payments, his total payments aggregate the sum of $1,000. On each of these payments, $5 is to be credited to the home fund, 35 cents to the expense fund, and 15 cents to the contingent fund. When these payments of the purchaser to the association aggregate the sum of $1,000, the association is to execute and deliver to the purchaser a deed of the property purchased for him with the $1,000, or to release or cause to be released any trust deed, mortgage, or other incumbrance which it may hold upon said property. Neither the trustees nor the other members of the association are to be personally liable on these contracts, and the purchasers are entitled to the benefit of no other fund than the home fund, and can only have recourse to that fund for payment, satisfaction, or indemnity. Until a purchaser has paid in the whole sum of $1,000, which, if he paid according to the contract, would not be until more than 17 years after beginning his payments, he is not entitled to any deed or instrument giving a title to any real estate, but all titles and interests in real estate are to be held by the association; leaving the purchaser no security and no right except that given by his contract, which is enforceable against the fund alone. Until he acquires a vested interest, if he fails to make a payment within 30 days of the time when it becomes due, his previous payments are forfeited and his contract becomes lapsed; and if, after he acquires a vested interest, he fails in like manner, then all future payments shall become due and payable, at the option of the association, unless such delinquency results from sickness or disability, and provided, if he is unable to pay by reason of loss of employment, a forfeiture shall not be declared until the expiration of 6 months from the date of his last regular monthly payment. When he recovers from his disability, he is to continue the future payments, and to make the suspended payments at the rate of one at the time of each regular payment. He has the privilege of paying his installments before they become due, if he chooses.

The Attorney General contends that this business violates Rev. Laws, c. 114, § 1, in relation to co-operative banks, which provides that no person, association, or corporation, except certain licensed ones, ‘shall transact the business of accumulating the savings of its members and loaning to them such accumulations in the manner of a co-operative bank, unless incorporated in this commonwealth for that purpose.’ This is a penal statute, which makes an offender punishable by a fine of not more than $1,000. As a penal statute, it must be construed strictly, and we are of opinion that the defendants are not within it. The purchasers of these contracts are not members of the association, and their savings are not savings of members, but of holders of individual contracts from the association. They have no voice in the management of the affairs of the association. No money of members of the association is lent to any of its members. The savings of these contractors are not accumulated and lent to them in the manner of a co-operative bank, but the course of dealing is very different from that of any bank. It may well be said that all the reasons for the enactment of this statute apply with great force to an association transacting business like that of these defendants. But the defendants are not within the terms of the statute, and they cannot be punished nor enjoined under...