SEC. 39. All corporations whose capital stock is required or is permitted to be paid in by the stockholders in regular, equal periodical payments and whose purpose is to accumulate the savings of its stockholders, to repay to said stockholders their accumulated savings and profits upon surrender of their shares, to encourage industry, frugality, and home building among its stockholders, and to loan its funds, and funds borrowed for the purpose, to stockholders on the security of unencumbered real estate and with the pledge of shares of the capital stock owned by such stockholders as collateral security, shall be known as building and loan association, and the words "mutual building and loan association" shall form part of the name of every such association.
It shall be unlawful for any building and loan association to make any loan upon property that is suitable for use only as theater, public hall, church, convent, school, club, hotel, garage, or other public building: Provided, however, That to facilitate the investment of the idle funds of a building and loan association, the Monetary Board may, in special instances, waive the provisions of this paragraph, in cases of public hall, school, hotel and other public buildings.
With the approval of the Monetary Board, a building and loan association may also invest such of its funds as may otherwise remain idle, in bonds and obligations of the Republic of the Philippines, or of any of its political subdivisions, or of any government-owned or controlled corporation, including the Central Bank.
SEC. 40. The articles of incorporation shall state the purpose of the association as set forth in section thirty-nine.
SEC. 41. Any person may become a stockholder of any building and loan association by subscribing for one or more shares therein and signing the by-laws of the association, following his signature with his post office address, but no member may borrow upon the security of real estate from any such association having assets of one hundred thousand pesos or more an amount in excess of ten per cent (10%) of the total assets of the association, nor may any such association make a loan upon any one piece of real estate amounting to more than ten per cent (10%) of the total assets of the association. In the case of a building and loan association having assets amounting to less than one hundred thousand pesos, no loan to any one borrower and no loan upon any one piece of real estate shall exceed ton thousand pesos. The Monetary Board shall have power to issue regulations governing the manner of determining such assets as the basis for computing the foregoing limitations.
SEC. 42. The capital stock of such associations shall be paid in by the stockholders in regular, equal, periodical payments known as dues, at such times and in such amounts as shall be provided in the by-laws of the association. The dues on each share of stock subscribed for by a stockholder shall continue to be paid by the stockholder to the association until the share has been duly withdrawn, cancelled, or forfeited or until the share has reached its matured value; that is to say, when the dues paid on each share and the net earnings thereof in accordance with the by-laws shall amount to the matured value of the share, but such association may issue and sell paid-up stock for each and also investment stock to be paid in installments. and may pay to the holders of such paid-up stock out of the net profits such rates of dividends as may be fixed from time to time by the board of directions of the association, which shall be expressed in the stock certificates and shall not participate further in the profits or accretions of the association. Paid-up stock issued after the date when this Act shall become effective shall not be entitled to vote he dividends payable upon such paid-up stock shall not be cumulative in the sense of being a charge upon the future earnings of the association should the earnings of the association not be sufficient in any particular year to meet the dividend requirements of such stock in that year. Either paid-up or investment stock may be surrendered by the holder at any time upon the giving of such notice as the association may require.
SEC. 43. The capital stock of every such association shall be divided into shares of the matured or par value of two hundred pesos each.
SEC. 44. Certificates of stock shall be issued to each stockholder upon the payment of the membership fee and first installment of the dues. The association may charge a membership or entrance fee not exceeding one peso on each share of stock issued and may also charge a transfer fee not exceeding twenty centavos on each share transferred, all of which shall be paid into the treasury and accounted for as funds of the association. Shares which have not been pledged as security for the payment of a loan shall be called "free shares," and shares which have been so pledged shall be called "pledged shares."
SEC. 45. Payment of dues on shares of stock shall commence from the time of issue of such shares.
SEC. 46. Whenever any stockholder shall be six months in arrears in the payment of his dues upon free shares, the secretary or clerk of the association shall give him notice in writing of his arrearages by mailing to him at the last post office address given by him to the association a statement of all such arrearages. If the stockholder fails to pay within two months after receipt of such notice the full amount of his arrearages the board of directors may, at its option, declare his shares forfeited. At the time of the forfeiture the withdrawal value of the forfeited shares shall be determined and stated by the board of directors, and the defaulting stockholder shall be entitled to receive such value without interest upon such notice as is required of a withdrawing stockholder.
SEC. 47. When the stock shall have reached its matured value, payment of dues thereon shall cease and holders of such matured shares shall be paid out of the funds of the association the matured value of their shares with interest thereon at the rate prescribed in the by-laws, from the time the board of directors shall declare such shares to have matured until payment is made. The order of payment of matured shares shall be prescribed in the by-laws and' at no time shall more than one-third of the receipts of the association be applied to the payment of matured shares without the consent of the board of directors and the approval of the Monetary Board: Provided, however, That if shares pledged to the association as security for loans shall mature before the loan is repaid the matured value may be credited to the loan. The withdrawal value of the pledged shares shall not be returned to the stockholders unless such value is applied in liquidation of the loan which the shares secure.
SEC. 48. By the affirmative vote of a majority of all its directors the association may borrow money for such temporary uses and purposes as the exigencies of the business may demand provided such action is consistent with the objects of the association. The aggregate amount of the outstanding indebtedness of any such association shall not at any time exceed fifty per cent (50%) of its capital stock actually paid in: Provided, however, That such limitation shall not include indebtedness to the Central Bank.
SEC. 49. In addition to the other requirements established in this Act, every loan made by the association must be properly evidenced by a note or other instrument in writing and must be secured by a first mortgage or deed of trust on unencumbered real estate and also by the pledge to the association of shares of stock of the association the matured value of which shall at least equal the amount loaned: Provided, however, That loans may be made on the security of free shares pledged to the association for the payment of the loan in case, at the time that the loan is made, the withdrawal value of such free shares under the by-laws shall exceed the amount borrowed and interest thereon for six months.
SEC. 50. In the discretion of the board of directors a loan may be repaid by the surrender of pledged shares whose withdrawal value equals the amount loaned and all interest and fines due thereon.
SEC. 51. The rates of interest on loans may be fixed in the by-laws or may be prescribed from time to time by board of directors, subject to the provisions of the Usury Law and to any regulations which the Monetary Board may issue with respect thereto.
SEC. 52. Whenever a borrowing stockholder shall be three months in arrears in the payment of his due on stock or in the interest or premium or installments of premium on any loan, the whole loan, at the option of board of directors, shall become due and payable and the board may proceed by action to enforce collection upon the securities held by the association. The withdrawal value of all shares pledged as collateral security at the time of the commencement of the action shall be applied to the payment of the loan, and such shares from the time of such application shall be deemed to be surrendered to the association.
SEC. 53. Mutual building and loan associations may purchase, hold, and convey real estate under the same conditions as those specified with reference to commercial banks in section twenty-five of this Act.
SEC. 54. Stockholders may surrender their shares and withdraw from the association after paying twelve monthly installments of dues upon giving sixty days notice in writing to the board of directors, and the withdrawal value of such shares shall be the total sum of the dues paid thereon plus not less than ninety per cent of all dividends earned by such shares up to the end of the last preceding fiscal period plus such interest for the time elapsed since the end of that period as shall be allowed by the board of directors. Stockholders who have not paid twelve monthly installments of dues may, after giving sixty days notice in writing to the board of directors, surrender their shares and withdraw from the association, and the withdrawal value of such shares shall be the total sum of the dues paid thereon plus such dividend or interest as may be allowed by the board of directors. In no event, however, shall more than one-third of the total receipts of the association be paid in any one month to retire such shares. Payment for such surrendered shares shall be made in the order in which notices of withdrawal have been received by the board of directors: Provided, That should the business of the association during the period such withdrawing member has been a stockholder show a loss in excess of the reserve available for meeting such loss, the withdrawal value of such shares shall be charged with their proportion of such loss: And provided, finally, That any fines or charges lawfully chargeable against such shares may be deducted before making payment to the stockholder. Except in cases of voluntary or forced liquidation of a building and loan association or forfeitures as provided in section forty-six of this Act, the board of directors of such association shall not have power to force the surrender and withdrawal of unmatured shares.
SEC. 55. At least once a year the profits on all business transacted shall be determined by the board of directors and apportioned to all the shares in each series outstanding at the time of such apportionment on the basis of the actual value of such shares, as distinguished from their withdrawal value, but in determining the profits which may be so apportioned, there shall be deducted from the gross earnings of the association all expenses and losses incurred in conducting its business. Five per cent (5%) of the net earnings shall be credited to a reserved account until the reserve equals five per cent (5%) of the total assets of the association. The reserve shall be maintained at five per cent (5%) of the total assets and shall be available for meeting losses incurred by the association. The remainder of the net earnings shall be available for apportionment among the stockholders. In the event of the liquidation of a building and loan association there shall escheat to the State any part of the reserve remaining after charging off all losses and defraying all expenses of liquidation.
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
