# Amicus Curiae Brief — United States v. Cambridge Loan & Building Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386007_0154%3A08 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1928 - **Citation:** 278 U.S. 55 ## Text In THE Supreme Court of the United States THE UNITED STATES & PEER, © NMESEEEMIE PeeaN GN te nee eu eeruUrrany MOTION FOR LEAVE TO FILE BRIEF asict CURIAE AND BRIEF The titole tong of lew eles t iv 6 @.ume ated ve. wh, » Ww Nat. shure te th, wr? Chue? thet ate « hee! @..6 #8 Spqetiant~ mm the emeee off The Jicem Sersmae aon Ga Ca ‘ Come ove Jelvomd Revcoe out Pa Be. Otter mw Sas ve Tt lute € ‘ -m- — Jat. 0 gl . “- ee fe woelee ff tie r fot @ "wu < OC premst eager? of Vs Pome fut the Meet © naw »° ~ pe freon foe Setiow@ of the cleeveneme of Phy 0 as@e.t OP ou > eared of Tax Appeals; that those cases present issues mivelving the construction of Sections 23114) of the Rev etiae Acts of 1918 and 21, the decision of whiect will probally tbe ruled by the decision of this court in thee ener; that counsel for both parties have consented in @riting te the Gling by the andersigned of a brict ame carver, aml thar consents have been filed with 1). clerk of thie court Wherefore, the «aid Cleaveland BR. Cross and I. tert Wo Neute pray leave te file hereim and sulanit { outemberatoen the fedlewing brief amet curtae ARGUMENT The Term “Domestic Building and Loan Associations as Emploved in the Revenue Act of 1918, Include: Every Association Designated or Known as a Bui) ing and Loan Association by State Laws The Revenge Act of 1918, Tith I, lart itl, peter ime for cofpetateet: inetne tatation, contains the 1 ee@ina ‘*Mow FT) That the Qkllowinge or@anita sha lw etetnge itetm tata stoebert . . . 4) Ihapeetie feplkling amd lean aewrwant aie “er » ’ shake wet? it entata oto ganites! atel eget steel for meutual purperer= ate foot gereetit The eftatut« he fest theme theet ber tite **hapsklitw : Lewet geecartal pertse In formulating a cefinition, if oe 0 pertant atel even contr dime te knew ehat were get ally recognized as building and loan associations at the time of the enactment of the statute in question. The mest fertile seuree of such information is found in the statutes of the several states providing for the organi- cation and regulation of building and loan associations. An examination of the state laws in foree at the time of the enactment of the Revenue Act of ISIS, and for ~ome Years previews thereto shows that building and loan associations were recognized as a special class ot corporations in all the states. (Note 1.) Ala. th o%, Ave 17. code 1907 \rk sec 7S St 21. Ares Title IN. th 3. cole 1913 Calt, See O48 Cw conde 1925 ‘ th NLINV. Comp Laws t omen lew ‘ WNATV th Ji”, tren ™“t 1v1s bet Gh oS Ave 3. camfe 9998 Fla Sexes 6.2157.-4342 Kew tren Se tea Seve JR7R JAR? conte POT) Itahe, Ch BM ¢ ons yp St 19)9 th 32 See 78 Kew St J91 th 27. Act 1. Borne’ Ann St 1920 ». Tele SX. Comp cote 1999 han th WV, Rew St $025 + > B*4 tuarrells Se le Seve Fear Tae Marrs Neon Kew St “ ‘? " Kes St W940 Med Sew 96 Are 23) Ann code 1911 Mase th 170 A LL 192) Meh th 1912. Comp I Mf one Sees 774877700 tren Se (pelt Mine ‘? *? Herne gears Ane cule Wi? Ve th Ace IN. RK S foe Vent. Pare 111. Oh 24. R «. $921 “ve Tete V Let NN Cem Se fol) Nes. Act of Mar 24, 3955 x hl at Je he ’ | ad . \S ¢ th GF Ave 18 Se Jono ‘ ole Comp 1. pops eo Tele 1% I Pew \ ‘> ! Cow conte ‘Yhle th 36 Ave 7. Comp Se 1929 firegem Tele XXNIN Ch VE feo Peon. See 2496 Se JOD t 47 ‘we 4 In all states but two they were classified as busines. corporations or corporations for profit, having a capital stock divided inte shares. In the two states referred to, ldahe amd California, they apparently might be orga: text with or without capital steck, (Note 2) By the statutes of 43 of the states building and Wssociations were expressly denominated as such Arizona and New York thev were elassified with and nominated savings and loan associations. Tn Massa setis tlie Were cero ited Co-operative haniks Ledahies they were che thi steed Laid ard hurling « | hens | Verm tt? Mere cletiotthuated ye sil ws tied i issemciatiotis Dri cacdedat stallment or running ste ’ t Vs sultrrize t ssuie | it? pre i i stittes Not ’ ‘ ‘ In twelve states associations were expressly author- ized to issue Various other classes of stock, including per- manent, preferred and guaranteed stock. (Note 4.) Associations had the unrestricted power to borrow money in fourteen states. (Note 5.) Ky. See 850 (4), Carroll's St; La, Sec 763, Ann. St; Md, See 137, Ann. code 1911: Mass. Sec. 12, A. L. 1921. Minn, See 7751. Gen St 1923: Miss. Sec. 3916, Ann. code 1917: Mo. Sec M201, R S. 1919, N. Y., See. 383, Cons. L- N ©, Sec. $177, St 19]9. Oho Sec Goay (sen. code: Oregon, See 6o935) LL 1920 K. 1. Sec 3803, Gen. L. 1923: =. Sec #16, Cw cade 1922 - S D. See 9071, code 1919 Ark. Sec 1703 ( als Nex $23 (ow code 1923 Del Sec. 1927, code 1918 a. Sec JR code 19])}. lah« Sex 4782 { omp St 19}9. van See 2214. Rev St 1923 vy. Sec. 88614}, Carroll's Se “ Sec Fos Mart s Ann A } 1. Sec 3903. Gen L 1V23 S ID Sex waist Kes code 1919 Tenn. Sec AWStia) 1. Ann code 1917 4 Ark Sec 1717. St 192) (alt. Sec. 325, Civ. code 123 Ihe sec 2. Ch. 2S Are J code YS tea Sec 2823 Conte 19} j telah Sec $17 Comp Se 1919 ind Sec SOU} Burns’ Ann S¢ 1926, ba. Sec 762. Marr's Ann Rev St Md. See 7. Art. 28 code 19}} Mass Sex It, Ch Wa A I 1921; Miss Sec 4074 Hemingways code 1917 N DPD. See $131, Comp L. 1913 (repwon, Sec 6926 1 1920 Ro 1. Sec M704, Gen I 1023 le: Sec QUS4 Ann oom c 1917 In eleven states the amount of money which might be borrowed was limited to a specified proportion of the assets, Varving from 10% to BOS. (Note 6.) In two states the amount of money which might be borrowed was limited to a specified proportion of th pariin capital (Note 7.) In four states the amount borrowed was limited t« AY specified proportion of the dues, installments or inte: est paid in, (Note 8.) In Washington the amount of borrowed money was Eo limited to a Proportion of the loans made, (Note 0) S In Pennssivania an association might) borrow a } amount not exeeeding 25°° of ite withdrawals. (Note 10.) : Pe fa ‘ ‘ ‘ sis 4 NN . MI { 4 4\4 « 1919 7 Associations are expressly given the power to re- ceive deposits in seven states, (Note 11.) Ten states permit associations without limitation to make loans to persons who are not members or stock- holders. (Note 12. In nineteen states associations might loan to non- members funds which were not required by members. (Note 13.) Note 1] Ariz, Sec. 2122, code 1973, Calt., See. 033, Civ. code 1923; Minn. Sec 7751, Gen St 1923, Ohio, Sec. 9048, Gen code; Oregon, See 6952. 1 1920, DS C, Sec. 4004. Civ. code 1922; S DD, Sec 9067. Rey code 19]9 Vote 12 Arie Sec. 2120, code 1933 Ark,, Sec. 1737. Se 192}, Calif. Se otk Cw code. (oa Sex JRTR. code JOD]. Idaho, Sec 49}). Md, Art. 23. code 1911; Miss, Sec 3922. Hemingway's code 1917 Mo. Sec. 10202. R S 1919. Oho Sec, 9643, Gen code Wash. See 4508 code 1939 Colo Sec 2794 Comp L Del Sec 2U1S key code 19} Fla, Sec 4218 Rey (cen. St. - Ine Sec SOR7, Burne’ Ann St 1926 Mass, Sex 2a, % 1760, A. 3. 192} Mont, Sec. 6388 ROC 1921; N. H Sec. 8, Ch 166 I. 1904 N. 1. Sec 24 \ Comp Stop 333 N M., See. $27, Se 1915. N. ¥., See, 388 Cons ha? NOD. Sec S120. Comp LL. 1973. (rkla Sec $399 Comp St. 192} Penna, Sec 2486 St. 1920; S ¢ Sec R24, Cw code SD, Sec. 9075, Rev code 1919 Tenn, See 2144. Ann code 1917, Texas, Sec D393 ex St 1920 Va. Sec 4148 code 1919 Wye Sec. S217, St J9]9 8 From the foregoing at will be seen that under Ui statutes of the several states regulating the organization and operation of building and loan ussociations the HW powers and practices vars considerably, Their primary purpose is the same, to furnish th financial means t o enable people to acquire homes. Their purpose is accomplished by accumulating from various sources funds which are lent te borrowers, in amounts comparatively large in proportion to the hotties deapuirecd, Thetr r funetion could not be efficiently performed by woks or offer fin cost of Ulie for long terms at a reasonable cost ‘ natnerdl institutions because of the lin (tations on the amounts which such institutions may est for long periods on real estate security and beeaus« other anstitutions wall net unvest their funds in hom loans at times when if it is more profitabl te to use them therwise For those reasons building and loan associat offer an advantageous ti and dependable means of fina: ing heme ownership whieh without them would not exis! It was because they so encouraged home owns rehiipe this! they were given the tax exemption benefit, and for ther reasat This ch arls Ap peda rs from the remarks of the s: ators who participated in the debate upon Seetion 20] “ hen it . ik came uy oat thy Senate on Oetober U7, 102] Cong. Ree, Vol ol, Part 7, pp. OS68.G872 ) Nuthortties genera have agreed that the pul welfare is concerted with and promoted by citizens ox g them own homes Legislative enactments have « sesptinet tiv 1 man’s states wrante aj fiy the ial rredteerns slenlate] to 3 ome ownership Such ondu em. ments have been vecasionally provided directly for the home owner or builder. More frequently they have been granted directly to building and loan associations which Were recognized as the most ficient agents for increas. ig home ownership. In MANY states associations have been favored over other corporations by whole or partial lax exemption. They have heen Kenerally exempted from the operation of usury laws, Frequently their in corporation fees or annual franchise fees have been reduced below the amounts paid by other Corporations Sometimes their shares have been exempted from tana tion in the hands of the oWhers, and in some states the shares are exempt from execution, We have been able to find no reported case Where a building and loan wssu chition hus breven denied any such privilege becuse of its spocual methods af operation, prior to the time the ques hen Was raised by the Treasury Department with respect fo the federal ineome tay exemption. The privileges have bron considered iis categorical, and net subject to the special fucts of ene couse, Methods emploaxed bn “ssociations iti carrving ou’ their purpose of assisting in the financing of homes will necessarily diter according to local real estate condi trons, wenlth and ieaome of home purchasers, building conditions, eney market, and other eonditions. In addi tion to the simple lending of money to enable borrowers fo aequire homes an association must Incidentally engage nother activities, It must first of all obtain the funds with which to make its loans and Which, obviously, must come largely from sourees other than its horrowers, The association must offer to people with Money to unvest terms whieh will induce them te place their money with 10 the association rather than elsew here, Funds may be ratsed by the sale of capital stock, Additional funds may be raised by accepting deposits from those who do not desire to become stockholders. Methods of operation, depending largely oh local conditions, are properly the subject of regulation by state laws. We do not believe that Congress was inte: ested ino such methods so long as they were consistent With the subject in Which Congress was nterested, namely, the « neouragement of hoame ownership, Itis neton the principle of mutuality that they wer exempted, or Congress would have expressly qualified them by that term, just as at did, in facet, in qualify: ‘“mutual’’ savings banks, and ‘‘mutual’’ hail, cevelone, fire insurance companies, diteh or irrigation compu ated telephene compaties, all of which were likewise ox empted by paragraphs (2) and (10) of Section 251 Strict mutuality, in the sense that the term appl to a mutual insurance company, for instance, is unpeos ‘ i | : ' he sible in the operation of a building and loan associat: A mutual insuranee companys provides insurance te its members and simply divides the cost among them It does no business other than with ats beneflelaries, w are ite policy helders. A busiding and im assectal 0 the contrary, must secure most of ats funds fr ifthers than els bene fcsaries, whe are tts borrowers, and whe ohberously could wot furnmesh the funds ¢ wry Ss biugseme ss t they wu add wot he borrowers Lonlike t! mutual pmasuranes mpansy, Which bears the same rela thon to all with whom ait does business, the building and earl a@sscmiaAtion © the creahitor of one elass with Wii 1] The only degree of mutuality which can be required of a building and loan association is that which will fur ther its purpose. It exists When its borrowers partici. pate equally in its benefits and when its transactions ar with others to the advantage of its borrowers, to the extent possible under existing business conditions, The government's contention that) transactions by lnnlding and loan dssociations with non stockholders are subversive of their purpose disregards the idea that lows to non stockholders constitute an extension of that purpose and not a departure from it. That is, if it be in the interest of the public welfare that stockholders own their homes, it is difficult to perceive w hy the public wel fare is not equally coneerned that non stockholders own thar own homes, other conditions being equal, II If the Exemption Granted by Section 231 (4) of the Revenue Act of 1921 Be Construed in a More Limited Sense Than the Exemption Granted by the Corre. sponding Section of the 1918 Act. the More Limited Exemption Should Not Be Given Retrospective Effect. The argument set forth above, in regard to the con struction of Section 231 (4) of the Revenue Act of 19]8 ison the main, applicable to the corresponding section of the 1921 Act. However, if the exemption provided by he 1921 Act should be held to he of narrower application han that of the 1918 Net. we submit that the status of hie nesociations for the period between January a 1921, 12 and November 23, 1921, is determined by the 1918 Act and not by the 192) Act, as contended by the govern. ment. The relations between the associations and their borroWers in cases Where loans were made during the period between the two dates mentioned were fixed by their contracts, and the associations had no control over such relations after the contracts were entered into, An association had no power to compel a borrower to become a stockholder after it had made him a loan as a non-stockholder. Congress must have had this situation in view at the time the 1421 Act was adopted From the debates in the Senate relating the Seetron 251 (4) of the 1921 Act, here- tofore referred to. it ts apparent that there existed ne intention to make the change, if any change were con- templated, retrospective to the first of the vear The language of Section 251 (4) as finally enacted Was that contained in the committee amendment to the bill reeenved from the House, which, after attempts to change itn the Senate, was finally passed in the torm reported by the finance committee, Respectfully submitted, Crraveraxy Ro Cross, Hennext W. Nats, --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386007_0154%3A08. Public record. Not legal advice.