Equitable Loan & Security Co. v. Waring , 62 L.R.A. 93 ( 1903 )

Cobb, J.

This case is here upon a bill of exceptions of the Equitable Loan and Security Company, assigning error upon an order of the judge of the superior court of the Atlanta circuit, placing its entire assets in the hands of a receiver for administration. The reasons for appointing the receiver were, that the scheme of the company, if not a lottery, was, to say the least of it, in the nature of a lottery, and was therefore illegal; that the contracts evidenced by its certificates were impossible of performance by legal methods; and that Such contracts were contrary to public policy. The court did not base its judgment upon the ground that the officers of the company had been guilty of malfeasance, misfeasance, or breach of trust. The court found that the officers of the company had not been guilty of any personal dishonesty or peculation in dealing with the assets of the company, but held that the scheme was illegal. The. court also foxmd, that, if the scheme of the company was legal and its contracts valid, any deception which may have been practiced upon any of the certificate-holders was not of such a character as to require the appointment of a receiver; that while such certificate-holders might have their remedy by a rescission of the contract, there was nothing in the evidence authorizing the appointment of a receiver on this ground. The court did not appoint a receiver on the ground of the insolvency of the company, and did not make any finding in terms on the question as to its solvency or insolvency. The court also found that .the company, under its charter, was authorized to make investments in real estate, and 'that the certificate-holders had no right to complain that the charter had been so amended as to authorize the company to engage in this business. It will thus be seen that the first question to be determined is whether the scheme of the company was illegal. In order to fairly pass upon the question of the legality of the scheme, it is necessary to take into consideration the origin and history of the company. The original charter of the company was granted on January 30, 1894, under an order of Fulton superior court. It authorized the company to carry .on the business of dealing in stocks, bonds, notes, and securities of every description, with a right to negotiate loans, charge commissions, and loan money upon collaterals, mortgages, or other security. It also authorized the com-' pany to issue investment bonds and certificates, to be paid for by the investor in monthly installments, or otherwise, the plan to be fully set forth injtlie certificates or bonds. The amount of the capital to be employed was fixed at $2,500, with the privilege of increasing it to $100,000. By an amendment to the charter, granted March 26, 1896, the company was authorized to purchase, improve, lease, sell, and dispose of or use in any way it might see fit, property of any description, real or personal; to execute notes, bonds, and other obligations, and to secure the same by deed of trust, or other form of security, including the right to guarantee the payment of obligations of other persons, natural or artificial; to pursue the plan of national or other building and loan associations, should its directors see fit to adopt such plan of operation in whole or in part. This amendment to the charter was accepted by the company on March 31, 1896. Shortly after its incorporation, the company issued an investment certificate, which is styled “Class A.” The following is a copy of one of such certificates:

“ The Equitable Loan and Security Company, of Atlanta, Georgia, promises to pay to-of-or order, at its home office in Atlanta, Ga., five hundred and five dollars and fifty-four cents ($505.54), upon the following express terms and conditions:

“ 1st. That there shall be paid by the holder to the maker hereof, at its home office in Atlanta, Ga., without any other or further notice, an installment of one dollar and twenty-five cents ($1.25) on the fifth day of each and every succeeding month hereafter until one hundred and thirty installments shall have been thus paid, time being of the essence of this contract.

“ 2nd. That the holder hereof shall surrender for cancellation this certificate, whenever the same shall be called, upon the payment to him of its then redemption value; the maker reserving the right to call and pay the same before maturity, Under the following rules and regulations. Certificates paid before maturity shall be paid in the following order, to wit: The first paid shall be number one, the second paid shall be number three, the third paid shall be number nine, the fourth paid shall be number two, the fifth paid shall tbe number six, the sixth paid shall be number eighteen, tbe seventh paid shall be number twenty-seven, the eighth paid shall be number four, the ninth paid shall be number twelve, the tenth paid shall be number thirty-six, and so on, according to the. table which is printed on the back hereof, and which table is hereby referred to and made a part of this contract.

“ 3rd. That the redemption value of this certificate, if paid prior to its maturity, shall be fifteen dollars if paid one month after date, eighteen and 5-100 dollars if paid two months after date, twenty-one and 11-100 dollars if paid three months after date, twenty-four and 18-100 dollars if paid four months after date, twenty-seven and 26-100 dollars if paid five months after date, thirty and 35-100 dollars if paid six months after date, and so on, the redemption value increasing three dollars with each installment paid, besides interest at the rate of four per cent.' per annum'on the redemption value of said certificate for the month next preceding the date of redemption hereof.

“ 4th. That of each and every installment paid as aforesaid the maker hereof shall place twenty-five cents to a reserve fund, which shall be used and held for the protection of all live outstanding certificates issued by this company; and seventy-five cents to a redemption fund, which may be used as follows: (a) For paying certificates issued by this company in the order and manner that they ■shall mature. (6) For paying off and retiring certificates prior to their maturity, according to the terms hereinbefore stated, (c) For ■paying the heirs, executors, or administrators of any deceased holder .hereof the sum that installments paid by such deceased may have ■contributed to the redemption and reserve funds, provided said certificate is in full force at death of holder and satisfactory proof of such death is furnished the maker hereof within sixty days after death occurs; and the remaining twenty-five'cents, and all transfer fees, shall be used for the expenses of said Company.

“ 5th. That a failure to pay any one of said installments when due subjects the holder hereof to a fine of fifty cents, which, together with the omitted installment, must be paid by the fifth day of the next succeeding month; and if said installment and fine are not paid within the said time, then this certificate shall be null and void, and of no value, and the holder hereof forfeits all payments and fines; provided, however, that this company will reinstate said certificate at any time within three months after such forfeiture, upon the holder hereof first paying all dues hereon, together with fines assessed at the rate of fifty cents for each payment in default. If this certificate shall,' according to the plan of redemption herein stated, become payable after it shall have been forfeited, and before its reinstatement, then it shall be entitled to payment the next month after its reinstatement. And provided further, that after sixty monthly installments shall have been paid in the manner herein provided, and all other stipulations herein shall have been fully, complied with by the holder hereof, and such holder shall thereafter default in any subsequent installment, the maker agrees to issue to such defaulting holder a new certificate which shall bear the next unsold number, for an amount equal to the payments made on such defaulted certificate, less the amount deducted for expenses, which new certificate thus issued shall be non-assessable and shall bear interest at the rate of four per cent, per annum, and shall be payable in its regular order as per plan of redemption herein stated; provided application for such new certificate shall be made to the home office of the Company and the old or defaulted certificate surrendered within three months after such defaulted certificate shall be cancelled on the books of the Company.

“ 6th. That all receipts from fines shall be paid into the redemption fund.

“ 7th. That the contributions to the reserve and redemption funds may be loaned to the holders of certificates issued by this Company, upon terms and security to be accepted by the Board of Directors; provided that not more than one hundred dollars can be loaned on account of any one certificate, and no loan can be made for a longer time than five years.

“ 8th. That after the reserve fund shall have reached the sum of one hundred thousand dollars, the interest earnings therefrom may, at the option of the Board of Directors of this Company, be applied to the redemption of certificates then in force issued by this Company. And when the reserve fund shall have reached the sum of two hundred thousand dollars, then fifty per cent., or any other portion of all the further current contributions thereto, may be applied to the redemption of certificates in force in like manner with the interest thereon, when the Board of Directors shall so authorize.

“ 9th. That no transfer of this certificate shall be valid or binding on the maker hereof until such transfer has been made in writing hereon, and the same duly recorded on the books of the Company at its home office; and for each transfer a fee of One Dollar must be made before a transfer will be made.

“ 10th. 'That each and every transferee of this certificate accepts it subject to all the stipulations herein.

“ 11th. That no statement made by any one except as herein set forth shall be binding on this Company.

“ 12th. That no part of the Reserve, Redemption, or other fund shall ever be loaned to any Officer or Director of this Company.

“ 13th. That no part of the Reserve or Redemption fund shall be loaned, except (a) upon improved real estate within the incorporate limits of the city in which it is located, and then not in excess of 50 per cent, of its cash market value; (b) Upon Government, State, County, or City Bonds that have never- defaulted the payment of interest; and this provision can never be changed except by the consent of every holder of live Certificates issued by this Company in Class “ A.”

“ In Witness Whereof, this Company has caused this Certificate to be executed in its name and behalf, under its corporate seal, by its President and Secretary.” (Dated and signed.)

The following appears upon the back of the certificate:

TABLE REFERRED TO IN THE BODY OF THIS CERTIFICATE.

READ FROM LEFT TO RIGHT.

Numeral Ool. No. 1st Multiple Col. No. 2nd Multiple Col. N6.

Pay first 1 then 3 then 9

Then 2 then 6 then 18

then 27

Then 4 then 12 then 36

Then 5 then 15 then ' 45

then 54

Then 7 then 21 then 63

Then 8 then 24 then 72

then 81

Then 10 then 30 then 90

Then 11 then 38 then 99

then 108

Then 13 then 39 ■ then 117

Then 14 then 42 then 126

then 135

Then 16 then 48 then 144

Then 17 then 51 then 153

then 162

Then 19 then 57 then 171

Then 20 then 60 then 180

then 189

Then 22 then 66 then 198

Then 23 then 69 then 207

then 216

Then 25 then 75 then 225

Then 26 then 78 then * 234

then 243

Then 28 then 84 then 252

Then 29 then 87 then 261-

then ‘ 270

Then 31 then 93 then 279

Then 32 then 96 then 288

then 297

Then 34 then 102 then 306

Then 35 then 105 then 315

then 324

Then 37 then 111 then 333

Then 38 then 114 then 342

then 351

Then 40 then 120 then 360

Then 41 then 123 then 369

then 378

Then 43 then 129 then 387

Then 44 then 132 then 396

then 405

Then 46 then 138 then 414

Then 47 then 141 then 423

then 432

Then 49 then 147 then 441

Then 50 then 150 then 450

then 459

Then 52 then 156 then 468

Then 53 then 159 then 477

then 486

Then 55 then 165 then 495

Then 56 then 168 then 504

then 513

Then 58 then 174 then 522

Then 59 then 177 then 531

then 540

Then 61 then 183 then 549

Then 62 then 189 then 558

then 567

Then 64 then 192 then 576

Then 65 then 195 then 585

then 594

Then 67 then 201 then 603

Then 68 then 204 then 612

then 621

Then 70 then 210 then 630

Then 71 then 213 then 639

then 648

Then 73 then 219 then 657

Then 74 then 222 then 666

then 675-

Then 76 then 228 then 684

Then 77 then 231 then 698

then 702

Then 79 then 237 then 711

Then 80 then 240 then 720

then 729

Then 82 then 246 then 738

Then 83 then 249 then 747

then 756

Then 85 then 255 then 765

Then 86 then 258 then 774

then 783

Then 88 then 264 then 792

Then 89 then 267 then 801

then 810

Then 91 then 273 then 819

Then 92 then 276 then 823

then 837

Then 94 then 282 then 846

Then 95 then 285 then 855

then 864

Then 97 then 291 then 873

Then 98 then 294 then 882

then 891

Then 100 then 300 then 900

AND SO ON.

A large number of these Class A certificates were issued. The-assistant attorney-general of the United States for the post-office department having given an opinion that the scheme indicated in these certificates was a lottery, by an order of the postmaster-general the mails were closed against the company, and, under the usual rules of the department in such cases, all letters addressed to the company were stamped as fraudulent and returned to the writer. An appeal was made to the department to reverse this ruling, but the department adhered to the same, and the postmaster-general refused to rescind the order closing the mails to the company. There were, at the time the present case was instituted, only seventy of these certificates outstanding, and the holder of only one of them. is a party to the present proceeding. It is not necessary to determine whether the scheme indicated in this class of certificates was legal. From the evidence it appears that the officers of the company, so far as they were able to do so, protected the holders of these certificates, notwithstanding their condemnation by the post-office department, and that all the holders, except the number above referred to, have been settled with upon terms which were, so far as the present record discloses, entirely satisfactory tó the holders, and that the company has in hand a fund derived entirely from receipts and investments from this class of certificates, which can and will be used, as far as practicable, in settlement with the holders of these certificates. The evidence further shows that the funds derived from this source have never been mingled with other funds of the company, nor have other funds been used in any way in the settlement or discharge of certificates of this- class We will, therefore, not pass upon the legality of the scheme indicated in this class of certificates, and will eliminate from the discussion anything in reference to this class of certificates, except so far as their history may throw light upon the legality of the schemes indicated in certificates subsequently issued. The judge did not appoint a receiver on account of the illegality of these certificates. The reason he gave for the appointment was that he thought subsequently issued certificates were illegal. If the receiver had been appointed solely on account of Class A certificates, the order of appointment should and would have been limited in its operation to the fund in the treasury of the company which was set apart for the payment of these certificates. Whether there should be a receiver appointed for this fund alone has not been passed upon by the judge, and will not now be passed upon by us. Hpon the refusal of the postmaster-general to rescind the order closing the mails against it, the company promptly ceased to issue certificates of the class above referred to, and did all that it was possible to do under the circumstances to protect those who had in good faith bought the certificates. The company then issued certificates known as “ Class B,” a form of which is as follows:

“ The Equitable Loan and Security Company of Atlanta, Georgia, hereby promises to pay to the order of-of---at its home office in Atlanta, Ga., Five Hundred Dollars, subject to the following express terms and conditions:

“ 1st. That the holder has paid four dollars herefor, and agrees to pay to the maker hereof at its home office, without any other or further notice, an installment of one dollar and twenty-five cents on the fifth day of each and every succeeding month hereafter, until one hundred and sixty-eight installments shall have been thus paid, time being of the essence of this contract, then this certificate shall become due and payable for its full face value.

“ 2nd. That the holder hereof shall surrender for payment and cancellation this certificate whenever the same shall be called, before maturity, upon the payment to him of its then redemption value, which value shall be the full amount of the first payment, and all installments paid hereon, with interest on said amount at the rate of eight per cent, per annum, and its proportionate share of all dividends or accumulations from fines, lapses, and interest earned in excess of eight per cent, per annum.

“3rd. That, in order to prevent favoritism or partiality being shown by the company, certificates paid before maturity shall be paid by numbers, and only according to the multiple table which is printed on the back hereof, which table is hereby referred to and made a part of this contract.

“4th. That of each and every installment paid as aforesaid the maker hereof shall place fifty per cent, and all net receipts from fines to a redemption fund, which may be used : (a) For paying off certificates prior to their full maturity term, according to the terms above set forth, (b) For paying certificates in the order and manner that they shall mature at the end of the full term, (c) For paying to the legal representatives of any deceased holder hereof the full amount of. the first payment, and all installments paid hereon, with interest at the rate of eight per cent, per annum, and its proportionate share of all dividends or accumulations from fines, lapses, and interest earned in excess of eight per cent, per annum; provided, this certificate is in good standing, and legal and sufficient notice of such death is furnished the maker hereof within sixty days after death occurs, or fines will be enforced as provided for in section 5th hereof; and provided further, that if the holder hereof at the date of this certificate was more than fifty years of age, that the said legal representatives of such deceased shall not have the right to surrender this certificate for payment upon conditions above set. forth, and the maker hereof can not be required to pay the same under this section hereof, but will issue in lieu hereof a paid-up certificate for the amount of installments that have been paid hereon, with four per cent, per annum interest, according to the provision regulating paid-up certificates in section fifth hereof, or this certificate may be continued as though death had not occurred; and thirty per cent, to a reserve fund which shall be used and held for the protection of all live outstanding certificates; and the remaining twenty per cent, and all transfer fees shall be used for the expenses of the company.

“ 5th. That a failure to pay said installments when due subjects the holder hereof to a fine of fifty cents each month for each and every installment in arrears, and if any installment or fine shall remain unpaid for six months, then this certificate shall become null and void, and of no value, and the holder hereof shall and does forfeit all payments and fines made hereon. Provided, that, at any time after eighty-four monthly installments have been paid hereon, the holder may surrender this certificate, if it is in good standing, and receive for it a new, non-assessable, and non-forfeitable certificate for the amount of installments that have been paid hereon, with interest at the rate of four per cent, per annum, which new certificate shall bear the next unsold number, and shall bear interest at the rate of four per cent, per annum, and be payable on or before the expiration of the tontine period from the time it is then issued.

“ 6th. That the entire assets of this company shall at all times be liable for the full payment of all obligations incurred in its certificates.

“7th. That the funds of this company may be loaned to the holders of certificates, upon terms and security to be approved and accepted by the board of directors.

“ 8th. That no part of the reserve or redemption funds can ever be loaned to any officer or director of this company.

“9th. That no transfer hereof shall be valid or binding on the maker until it has been approved by the directors and recorded on the books of the company at its home office, and a fee of one dollar paid for making such record. Each and every transferee hereof accepts this certificate subject to all the stipulations herein.

“ 10th. That no officer or director of this company, or any member of his or their families, can purchase or own this certificate.

“ 11th. That no statement made by any one except as herein set forth shall be binding on this company.

“ In witness whereof this company has caused this certificate to be executed in its name and behalf, under its corporate seal, by its president and secretary.” (Dated and signed.)

The multiple table referred to in this certificate is the same as-that which appears upon the back of certificates of Class A. The-scheme of the company as indicated in these certificates was approved by the assistant attorney-general of the United States for the post-office department, and from the time it began to issue these certificates the company had the same unrestricted right to the use-of the mails as any person engaged in a lawful business. Whether the certificates of Class A were legal or illegal, it is to be said to-the credit of the company and its officers that they abandoned the use of the same as soon as the authorities of the post-office department had declared them to be illegal, and did not issue any other form of certificate until the same had been approved by the law officer of that department. These facts indicate that it was the-intention of the officers of the company at all times to obey the law of the land and to heed the voice of its authorized officials.

Is the scheme of the company as indicated in certificates of Class B of such a character that it must be declared unlawful, violative of sound'public policy, and calculated to defraud ? Let us first look at the scheme as indicated by the certificate, independently of other evidence throwing light upon the character of the contract. The certificate is an obligation on the part of the company to pay to the holder the sum of $500, subject to the terms and conditions named in the certificate. Is it reasonably probable that the scheme indicated by these certificates can be carried into execution ? While it does not appear in terms in the certificate, the fact is, as admitted, that the $4.00 paid by the certificate-holder is allowed the agent obtaining the certificate as a fee, and that this sum does not-go into the treasury of the company. Twenty-five cents of each monthly installment is set apart for expenses. It is therefore to-be determined whether it is reasonably probable that the company can legitimately realize with the monthly installments of $1.00, at-the end of fourteen years, a sum sufficient to pay the holder of the certificate $500. Of course, if the contract is considered as simply a contract to receive $168 in monthly installments of $1.00 and to pay the holder of the certificate eight per cent, interest thereon,, the contract is incapable of performance; for eight per cent, upon ■$168 paid in monthly installments would not, of course, realize the sum of $500. But that is not the contract embraced in the certificate, taken in the light of the purposes for which the company was organized. The contract is to take the money paid to it in monthly installments and improve it according to well-known legitimate business methods, and guarantee to the certificate-holder that at the end of fourteen years the company will pay to him the sum of money named in the certificate, which the company considers by its guaranty as the legitimate earnings of the money of the certificate-holder, turned over and over and over again during the period that it is in the hands of the company. If the company in the handling of this money were limited to investments of the money at eight per cent, simple interest annually, then no person of ordinary intelligence would for a moment purchase one of these certificates; for it would be manifest, not only to a man of average intelligence, but to the man far below the average, that such a contract was an impossibility. The legitimate resource’s of the company under its charter, which may be called into exercise for the purpose of improving the funds belonging to its certificate-holders, are far more numerous than loans upon simple interest at the rate of eight per cent, per annum. The company vis authorized to loan money at eight per cent., and may contract for the interest to bn payable annually, semi-annually, quarterly, bi-monthly, monthly or in even shorter periods. Such transactions would be perfectly legitimate, and are not subject to the charge of being usurious.

But suppose it should be said that interest payable monthly or for shorter periods is unusual, and that it is improbable that the company would transact business upon this plan. The reply is that it is legal and is one of the legitimate resources of the company, and it can not be said that it is impossible, or even improbable, that the company will realize funds from this source. Loans of money, with interest payable at short intervals of time, are not unusual in the business world. They are constantly made by banks and other moneyed institutions. In addition to this, the company has a right to purchase negotiable paper, and in the purchase is not restricted, under the law of this State, to discount at the rate of eight per cent.; and the proceeds that in all probability can be derived from this source of income would aid very much in the improvement of the fund placed, under the contract, in the hands of the officers of the company for improvement for the benefit of the certificate-holder. The company is authorized to engage in the purchase of property, either real or personal, and experience has demonstrated that wise and prudent business men make handsome profits in a business of this character. Indeed, there is scarcely any limit to the possible profits to be derived from such investments wisely made. The company is also authorized to deal in stocks, bonds, etc., and to guarantee the payment of obligations of other persons, both natural and artificial. All of these methods of business are lawful, and, if wisely adhered to, are profitable, and this company has authority to engage in them. In addition to these, there are other resources of the company for the benefit of the persistent certificate-holder who continues to the end. Under the terms of the certificate, if any member desires to discontinue payments of installments at the expiration of seven years, he may do so, taking a paid-up certificate bearing only four per cent, interest; and the legal representatives of deceased members who were more than fifty years of age at the date their certificates were issued may take paid-up certificates of similar character. Another resource is redemption of certificates. Still another is fines; and lastly lapses or forfeitures for non-payment of assessments during the first seven years. The company holds out to the world that it will take the money of others and improve it in these various ways and pay back at the end of fourteen years a guaranteed sum.

Let it be conceded for the moment that all of the sources of profit above referred to are legitimate and proper, can it be said as matter of law that the scheme of the company is so far beyond possibility or probability of performance that those who engage in it are engaged in a fraudulent scheme which should be branded as being contrary to a sound public policy ? Have not legitimate financial institutions in the past taken the money of investors and improved it in such a way that the profits were far in excess of the profits intended to be realized under this contract ? Are not sound financial institutions at this time engaged in lines of lawful and legitimate business where profits of this character are realized for investors who intrust their money to them % It has been said that the “power of courts to declare a contract void for being in contravention of sound public policy is a very delicate and undefined power, and, like the power to declare a statute unconstitutional, should be exercised only in cases free from doubt.” Richmond v. Railroad Co., 26 Iowa, 202. It will not do for courts to declare ^contracts void simply because they are apparently unwise or even foolish. The authority of the lawmaking poiuer to interfere with the private right of contract has its limits, and certainly the courts should be extremely cautious in supervising private contracts, when the lawmaking power has not declared them to be unlawful. The possibility or the probability of one being able to perform many of the contracts known to the commerical world is dependent upon so many considerations that it is only in an extreme case that the court should hold that a given contract is of such a character that its performance is impossible or improbable and that those who entered into it must have done so with a fraudulent intent. Of course, •it is the duty of the courts to put their stamp of disapproval upon all contracts which are fraudulent, and for this reason calculated to deceive the confiding and the credulous. But not all foolish contracts are fraudulent, and it is neither the duty nor within the power of the courts to relieve a person from a contract merely because it is in its terms unwise or even foolish. Taking the contract evidenced by the certificate under consideration, with all of the resources of the company which can be called into operation for the purpose of improving the funds intrusted to its care, we can not say as matter of law that the contract is so unreasonable and incapable of performance as to be void because opposed to a sound public policy. The company may be able to comply with the contract. On the other hand, it may not. ' Contracts, although not exactly of a similar nature, but involving as much risk of loss have been complied with. On the other hand, contracts involving less risk of loss than is apparent in this one have not been complied with. The success of the scheme of this company depends largely upon the honesty, wisdom, and business sagacity of its officers, and those who place their money in the hands of the company take the chances that are always incident to intrusting to another the handling and improvement of a sum of money.

In thus dealing with the question, we have assumed that the company had at its command all the sources of income above referred to. It will of course be conceded that those resources which relate to the purchase and sale of property, the guaranteeing of obligations, and the loan of money at lawful rates of interest are perfectly legitimate and proper; and persons engaging in business of this character lay themselves subject to no penalty or criticism. It is said, though, that the company relied upon lapses, and that lapses are based upon forfeitures, and that forfeitures are abhorred, and that contracts which' depend for their performance entirely upon forfeitures are contrary to law and opposed to sound public policy. Forfeitures are not favored; and where a contract is ambiguous, and is capable of being so construed as to provide for a forfeiture and so as not to so provide, the courts uniformly hold that they will so construe the contract as to avoid the forfeiture. But the law permits a man to make a contract which will result in a forfeiture; and when it is clear from the terms of the contract that the parties have so agreed, a court of law, as well as a court of equity, will enforce the forfeiture. The time of payment specified in a contract may be material, and by its terms a failure to pay within that time may involve an absolute forfeiture; and if it does,'this forfeiture will not be relieved against even in a court of equity. Mr. Justice Bradley, in New York Life Insurance Co. v. Statham, 93 U. S. 30-31, in referring to the forfeiture of an insurance policy for non-payment of premiums, says: “ Forfeiture for non-payment is a necessary means of protecting themselves from embarrassment. Unless it were enforceable, the business would be thrown into utter confusion. It is like the forfeiture of shares in mining enterprises, and all other hazardous undertakings. There must be power to cut off unprofitable members, or the success of the whole scheme is endangered. The insured parties are associates in a great scheme. This associated relation exists whether the company be a mutual one or not. Each is interested in the engagements of all; for out of the coexistence of many risks arises the law of average, which underlies the whole business. An essential feature of this scheme is the mathematical calculations referred to, on which the premiums and amounts assured are based. And these calculations, again, are based on the assumption of average mortality, and of prompt payments and compound interest thereon. ■ Delinquency can not be tolerated or redeemed, except at the option of the company. This has always been the understanding and the practice in this department of business.” See also Klein v. Ins. Co., 104 U. S. 88. In Union Investment Asso. v. Lutz, 50 Ill. App. 176, it was held: “An investment association which applies the principle of joint tenáncy to the investments by the subscribers, the survivorship depending upon default of the members, instead of death, is not prohibited by law; and neither is such an association prohibited because the theory on which profit is promised is that one half or more of the subscribers will fail to keep up their dues, and whatever money is paid in by defaulting subscribers will enure to the benefit of those who ■do not default. See also 26 Am. & Eng. Ene. L. (1st ed.) 61.

The mere fact that the business or scheme depends to some extent upon forfeitures or lapses will not be sufficient to render the entire scheme invalid. If the scheme is dependent largely upon lapses, and it is apparent that a sufficient number of lapses to effectuate it will probably not occur during the period provided for the maturity of the contract, the question would be altogether a different one. In such a case the scheme might be illegal. In State v. Investment Co. (Ohio), 52 L. R. A. 530, 60 N. E. 220, it was held: “Contracts of investment security, debentures, or certificates, which can not reasonably be expected to accumulate a reserve fund equal to the stipulated endowment values within the stated period, without aid from lapses or appropriation from premiums on new business, are fraudulent, contrary to public policy, and unlawful.” In the opinion Davis, J., said: “A scheme which can succeed only by lapses is manifestly a scheme which will enrich some at the expense of others who embark in the same enterprise. It holds out the inducement that those who may be strong enough to survive will find their profit in the weakness, the misfortunes, and the discouragements which cause a larger number of their associates to fall by the way. Moreover, since the salvation of the company depends on these lapses, it necessarily tends to encourage and produce them. True enough, all of these certificates are non-forfeitable after 36 monthly payments, but that only signifies that a larger number must fail in the first three years, or that the whole scheme must fail; for the vice of the plan is not that some may faff, but that many must faff, in order that all continuing' certificates shall mature.” See also Peltz v. Financial Union (N. J.), 19 Atl. 668; State v. New Orleans Redemption Co. (La.), 26 So. 586. If these authorities simply hold that where it is apparent that the scheme is so dependent upon lapses that it could not succeed without them, and where the number of lapses necessary to effectuate the scheme is beyond all reason and would in all probability not occur, the scheme would be fraudulent, we will not undertake to combat the proposition thus laid down. If, however, the holding goes to the extent that every scheme dependent upon lapses, even many lapses, is inherently fraudulent, we can not recognize such a ruling as in the slightest degree sound. In a case where lapses are simply a part of the scheme, and it can not be said with certainty they form even a large part of it, the court should not declare the contract invalid as being opposed to a sound public policy simply because the success of the scheme is in part dependent upon forfeitures and lapses. If this were the law, then not only would the business of life-insurance in all of its branches be at an end, but many contracts in other lines of business would come under condemnation. If absolute forfeitures and lapses would not make the contract invalid, then of course- partial forfeitures, such as result-from the voluntary retirement of a member at the expiration of seven years, would not make the contract illegal. Nor would partial forfeiture resulting from the death of a member affect the legality of the contract. Considering as a whole the resources the company may resort to for the purpose of carrying out the contract, it can not be said as matter of law that the contract is fraudulent, or violative of the law of the land, or contrary to a sound public policy . It may be that the contract is unwise; it may be that it is a contract attended with risk, even great risk. But these are all questions to be determined by the investor, and we know of no law which prohibits him from taking the risk of such a contract.

Our learned brother of the circuit bench held that the scheme was a lottery, or at least in the nature of a lottery. There are various definitions of a lottery, some of the broadest being as follows: “ A ■ scheme for distributing prizes by chance or lot, where a valuable consideration is given for the chance of drawing a prize; especially where such chances are allotted by sale of tickets.” Standard Dictionary. “ A scheme by which a result is reached by some action or means taken, in which result man’s choice or will has no part, and which human reason, foresight, sagacity, or design can not enable him to know or determine, until the same has been accomplished.” Bouv. Law Die. “Where a pecuniary consideration is paid, and it is determined by lot or chance, according to some scheme held out to the public, what and how much he who pays the money is to have for it.” Anderson’s Law Die. “ Any scheme for the disposal or distribution of property by chance among persons who» have paid, or promised or agreed to pay, any valuable consideration for the chance of obtaining such property, or a portion of it, or for any share of or interest in such property, upon any agreement, understanding, or expectation that it is to be distributed or disposed of by lot or chance, whether called a ‘lottery,’ a ‘raffle,’ or a ‘gift enterprise,’ or by whatever name the same may be known.” Black’s Law Die. Lotteries and similar schemes are prohibited by the law of this State. Penal Code, §§ 406-407; Meyer v. State, 112 Ga. 20. There are three essential ingredients in a lottery — consideration, prize, and chance. One of these ingredients is certainly present in the scheme now under review, that is, consideration. Are the other two present ? If the element of prize exists at all, it is to be found in the second clause of the certificate, which is as follows: “ That the holder hereof shall surrender for payment and cancellation this certificate whenever ..the same shall be called, before maturity, upon the payment to him of its then redemption value, which value shall be the full amount of the first payment, and all installments paid hereon, with interest on said amount at the rate of eight per cent, per annum, and its proportionate share of all dividends or accumulations from fines, lapses, and interest earned in excess of eight per cent, per annum.” If this clause of the contract can be properly construed to mean that the company is compelled, or even may call for redemption any certificates before they have earned eight per cent, interest per annum on the full amount of the first payment and on all installments paid, then there is an element of prize in the contract. But can the clause of the contract be properly so construed ? It provides that the holder of a certificate shall surrender it before maturity, whenever the same shall be called, upon payment to him of its then redemption value. This redemption value is then declared to be the full amount of the first payment and all installments paid on the certificate, with interest thereon at the rate of eight per cent, per annum, and its proportionate share of profits earned in excess of eight per cent. .The certificate can not be called until it has a redemption value, and that redemption value is fixed at a sum not less than eight per cent.,; but it may be more than eight per cent., provided a greater sum than this has been earned. Does the contract mean other than that the company may call for redemption those certificates which have earned at least eight per cent, on the amount paid in? Is not'this the real meaning of the -clause ? Do not the words, “ earned in excess of eight per cent.,” necessarily imply that there can be no call for redemption until at least eight per cent, has been earned ? This seems to us a proper and reasonable construction of the contract. But suppose the clause is ambiguous. It is familiar law that if a contract is of doubtful meaning, and one construction would make it legal and another illegal, the courts are bound to adopt that construction which will not impute to the parties an intention to disobey the law. It is not to be presumed that people intend to violate the law, and the language of their undertakings must be always construed, if possible, in such a way as to make the obligation one which the law would recognize as valid.

This view of the matter is strengthened when we consider that it is the construction which the company has always placed upon this clause in the contract. The evidence in the present case shows that the officers of the company have construed this clause of the contract to mean that there was not to be any redemption until the certificate had earned at least eight per cent, on the amount paid in. The secretary of the company testified: “A certificate is not eligible for redemption until it has earned eight per cent, at least. If aman has not been in but six months,'his certificate has not a redemption value until that sum has been earned, starting always with the $1.00.” “No certificate was redeemed until its pro rata part of the assets of the company equaled the full amount paid to the company on account of said certificate, with interest thereon at the rate of eight per cent, for the average time.” If under the contract no certificate can ever be called for redemption until it has earned at least eight per cent., then there is no element of prize in the contract. If the affairs of the company are in such condition that some of the certificates have earned at least eight per cent, upon the amount paid in, then under the contract it is .a question for the company to determine whether it is to the interest of the. company to retire such certificates, either in whole or in part. The holders have all agreed to surrender their certificates whenever they are tendered this amount; and whenever the company is in a position- where it can tender this amount, or more, it is simply a question as to what shall be the policy of the company — to retire a portion of such certificates at their then value, or to retain the entire fund to be used and improved for the benefit of the certificate-holders. When the company determines that it is to the interest of all concerned that a portion of the certificates shall be redeemed, then the question arises as to how many of such certificates shall be redeemed, and how shall it be determined which certificates shall be called for redemption. The holders of these certificates place their money with the company for the purpose of increase and profit, and each investor thus placing his money with the company does so upon express condition that whenever a point has been reached where bis certificate has earned eight per cent, or more, the company has the right to tender him the value of his certificate and compel him to surrender the same. It might be more to the interest of all the certificate-holders to continue to the end, but. by the very terms of the contract every certificate-holder has agreed with the company that it may settle with him at the value of his certificate at any time after it has earned eight per cent. This being the contract of each certificate-holder, and it being foreseen that it would not be wise in all instances to redeem every certificate that had a redemption value, some method had to be adopted by which it would be determined who should be entitled to have their certificates redeemed if redemption was desirable, or who should be compelled to surrender their certificates if redemption at that time was undesirable. The whole purpose of the company was to make money for its certificate-holders. Under the contract it may come to a settlement with some of its certificate-holders at any time when the assets of the company would authorize a settlement at a sum made up of at least the amount paid in and eight per cent, interest thereon. When it should have this settlement was left to the discretion of the company. The number' who should be entitled to such settlement at any given time was also left to the discretion of the company. The manner in which the number should be selected was not left to the discretion of the company, but was to be determined by reference to what is called the multiple table, a copy of which is set forth above. When the company has determined how many certificates shall be called,'a reference to this multiple table and the books of the company showing the outstanding certificates will show exactly what are the numbers tof those certificates which will be then called. It can be determined as absolutely what numbers are embraced in a given call lindar the multiple table as if the plan had been adopted to redeem the certificates in numerical order. Some plan had to be adopted for ascertaining what numbers should be called when it was not desired to call all certificates that had a redemption value. Any plan adopted would be purely arbitrary, and any plan adopted would have some element of chance in it, using that word in its broad sense. If the plan had been to pay certificates in their numerical order, there would have been the same element of chance as there is under the plan actually pursued, because the time at which the certificates shall be called would be governed in each instance by the order in which the applications reach the secretary and numbers are placed upon the certificates.

But let it be conceded that there is an element of chance, the scheme is not a lottery, or in the nature of a lottery, unless there is also' the element of prize. We can see no element of prize in the scheme whatever. Certificates are called for redemption and matured at their own value, without reference to the redemption value of other certificates. It may be that the redemption value of a certificate will be the same as that of another certificate of another date, or it may be that its redemption value will be smaller or greater. But the holder gets no prize in the sense that term is used in lottery law. Each holder receives a return of the money which he has paid in, together with what it has earned, and can be compelled to receive this at any time that the earnings are eight per cent, or more. The company makes the contract to pay a certain amount at the end of fourteen years, if in the management of the business it sees proper to retain the money during that entire period. It reserves the right to settle with each holder before the end of that period, at any time after the earnings of the company are such that his certificate would have the redemption value fixed in the contract, and it reserves the right to determine whether at such a time it will pay him or pay another certificate-holder whose certificate is ready for redemption, by a reference to the multiple table above referred to. It must be admitted that the plan of redemption by reference to tbe multiple table is unique, and may even be said to be “ catchy,” speaking colloquially; and was probably resorted to for the purpose of attracting attention. But it would never do for the courts to hold that unique and unusual methods make enterprises unlawful or contrary to public policy. After the most careful investigation and anxious consideration of this matter, we are unable to see in this contract anything which partakes of the element of prize. It seems to ■ us that the contract is one of investment, where the investor relies upon the honesty, probity, and business sagacity of those in charge of the affairs of the company, and intrusts his money to them with the expectation of receiving satisfactory and, it may be, large profits at the end of the period fixed in the contract, but at the same time expressly undertaking to withdraw his money at any time the company is in a position to ■offer him, as earnings on that money, the minimum amount fixed as a redemption value of his certificate, and this too at a time when other certificate-holders, whose certificates are of greater or less redemption value than his, or it may be exactly equal with his, are not compelled to retire. It is said, though, that under the operation of the multiple table a certificate might be called at a time when it had not earned the amount necessary to make the redemption value. The secretary of the company testified: “We have never reached a multiple when the certificate has not earned ■eight per cent, interest on the original $4.00 and the $1.25 paid in.” Under the contract as we construe1 it, the company would not have a right to call for redemption a certificate which had not earned its minimum redemption value; and as the company, by reference to its multiple table and the list of outstanding certificates, can tell, whpn it fixes the number of certificates to be called, exactly what will be the numbers embraced in the' call, it is not to be presumed ■that the company will make a call that embraces a number which could not be lawfully redeemed. The evidence just referred to shows that so far in the operations of the company no certificate has been called which was not entitled to be redeemed under the contract as we have construed it.

To make a lottery, as above stated, three ingredients must be present — consideration, chance, and prize. We find in this contract certainly the element of consideration, possibly the element of ■chance, but under no circumstances the element of prize. Chance ■alone will not make a lottery; and chance even when coupled with consideration alone will not make a lottery. When a number of persons are entitled in any event each to a given amount, though it may not be the same amount, and all can not be paid at one time ■the determination by lot or chance or drawing of what portion of that number shall be paid at different times would not give to the transaction the characteristics of a lottery. It is when the amount to be paid, or the value of the article to be delivered, is itself determined, either in whole or in part, by lot, drawing, or chance that the elements of a lottery are present. Corporations issue bonds and reserve the right to call in for redemption a portion of the bonds before they are due. It is not unusual in such cases for the contract to stipulate that the numbers of bonds to be called shall be determined by lot or chance. Such a transaction as this has never-been held to be a lottery, although there was the element of chance in regard to whose bonds should be called. It is not a lottery, because there is no element of prize. The value of the bond is not increased or diminished by the drawing. Each bond is paid its value at the time it is called, — no more, no less; and the only question determined by lot is whether the bond of A shall be called instead of the bond of B, or the bond of one number in preference to the bond of another number. Many schemes and devices have been held to be lotteries. Erom the briefs of counsel we select the following as a portion of the many cases that might be found relating to this subject: Meyer v. State, 112 Ga. 20; McLaughlin v. Investment Co., 64 Fed. 908; Horner v. U. S., 147 U. S. 449; State v. Clark, 33 N. H. 329; Thomas v. People, 59 Ill. 160; In re National Indemnity Co. (Pa.), 21 Atl. 879; United States v. Politzer, 59 Fed. 273; Dunn v. People, 40 Ill. 465; Sykes v. Beadon, 40 L. R. Ch. Div. 170; MacDonald v. United States, 59 Fed. 563, 63 Fed. 427; United States v. Fulkerson, 74 Fed. 619; Hudelson v. State (Ind.), 48 Am. Rep. 171; State v. Moren (Minn.), 51 N. W. 618; Ballock v. State, 73 Md. 1. s. c. 25 Am. St. R. 559, 8 L. R. A. 671; State v. Mercantile Ass’n. (Kas.) 11 L. R. A. 430 ; State v. Boneil (Mich.), 10 L. R. A. 403 ; Reg. v. Harris, 10 Cox’s C. C. 352; United States v. Zeisler, 30 Fed. 499; United States v. Wallis, 58 Fed. 942; State v. Shorts, 32 N. J. 398; Com. v. Thacher, 97 Mass. 583; Quatso v. Eggleston (Ore), 17 Cen. L. J. 332.

We do not think it would be desirable or profitable to discuss in detail the facts of these numerous cases that have been called to our attention. Many of them are merely cases relating to general principles in reference to the law of lottery, about which there is no dispute. Some of them relate to investment companies; but none of these are, in our judgment, either in their facts or in their-reasoning close enough to the present case to be followed by us, even if they were decisions which were binding upon us as authority. In those cases where the facts were at all similar to those of the present case, there were some facts which, in our opinion, materially distinguished the cases from that which we now have under consideration. There was a union in each case of chance, prize, and consideration, or the contract was of such a character that it was so largely dependent upon lapses as to make it fraudulent and void. If in the foregoing discussion we have'been so fortunate as to have clearly set forth what we understand to be the scheme of the contract involved in the present case, we feel perfectly safe in saying that a mere casual examination of the cases cited will be all that is necessary to differentiate every.one of them from the one now under review, though it is not at all incumbent upon us to show that any distinction between the cases exists. The courts have in many cases made rulings which were intended to protect the public from being imposed upon by fraudulent devices in the form of investment companies, and it is proper that ’the strong arm of the courts should be used in cases where the scheme is fraudulent and calculated to deceive and defraud. But no case has been called to our attention where any court of last resort has ever held a contract like the one under consideration, understood as we think it should be understood, and as the entire scheme requires it to be understood, to be unlawful or incapable of enforcement.

It is not insisted, as we understand, that there is any infirmity in that clause of the certificate which provides that the legal representatives of a deceased certificate-holder, who was not more than fifty years of age when the certificate was issued, shall be settled with by the payment of all amounts which have been paid in, with eight per cent, interest thereon, and its share of earnings in excess of that amount; and if the deceased holder was more than fifty years of age when the certificate was issued, and his legal representatives do not desire to continue the certificate as though death had not occurred, they shall be settled with by the delivery of a paid-up certificate for the amounts paid in, bearing four per cent, interest per annum. Nor was it claimed that there was any infirmity in that part of the contract which provided that one who ,had paid for 84 months should be entitled to a paid-up certificate for such amounts bearing four per cent, interest per annum. It might be that under the contract the legal representative of a holder who was not more than fifty years old when the certificate was issued would receive the full amount paid in. with eight per cent, interest thereon, at a time when this amount had not earned eight per cent.; but as this payment would be due to him by the happening of the death of the certificate-holder, which is an event ooming in due course of nature, this would not make the scheme any more illegal than it would make every contract of life-insurance fraudulent and void. Taking the contract as a whole, and viewing the same as it has been construed by the officers of the company, and in the light of the manner in which the affairs of the company have been administered, we find nothing in the contract that would justify us in condemning the same as illegal.

It is said, though, that the company issued literature which was calculated to impress the public and those who invested in the company with the idea that the business carried on was the business of a lottery, and that this literature was misleading and did not set forth the character of the enterprise as now contended for by the company. We will set forth some of these extracts from the literature of the company. Certain circulars of the company sent to prospective investors contained the following statements:

“ The Equitable Loan and Security Co. is an established financial institution, whose governing principles are security, profit earnings, and speedy returns to the investor.

“ All certificates pay their holders their equitable ratio of profits, whether called for redemption the 12th, 24th, 36 th, or any month after their issuance.

“ Insurance companies kill the man and pay the policy; the Equitable Loan and Security Co. kills the policy and pays the man, thereby insuring a speedy return to living members.

“A thorough knowledge of our plan will also show that it is absolutely perfect in point of security, profit earnings, equity, and speedy returns to the investor.

“ To guarantee our certificate-holders the largest profits and quickest possible returns, no officer or director of this company, or any member of his or their families, can ever own or purchase certificates, thus preventing those who aré familiar with the inside workings of the company from speculating on delinquent investors and realizing any profits at the expense of prompt and persistent holders.

“ Twenty certificates purchased in the Equitable Ipan and Security Company, if carried to maturity, will pay you Ten Thousand Dollars, yielding a clear profit of $5,720.00.

“ The chief element and most prominent feature in our plan is to call and pay certificates as rapidly as our business will permit at their value, which value shall always be the full amount of first payment and all installments paid on them, with 8 fo interest, and their proportionate share of all dividends, accumulations from fines, lapses (forfeitures), and interest earned in excess of 8 fo per annum. For the express purpose of calling certificates for payment as rapidly and as early as possible, a redemption fund has been created,” etc.

These extracts from the literature of the company contain a few of the many alluring attractions which are held out to prospective certificate-holders. They embrace, we believe, those which are principally relied on in the present case to show misrepresentation and fraud in reference to the character of the company’s business. It must be admitted that these declarations in the literature of the company evince a hopeful and sanguine spirit on the part of the officers of the company, and it is evidently their desire to impress the public and possible investors with this same spirit. Is what is said in this literature anything more than an effort to call attention to the character and business of the company in an attractive, •enticing, and fascinating way ? Are not such methods usual in the •commercial world with those who have something to sell? Are they not permissible when not false or fraudulent ? When these statements are read and understood, there is really nothing inconsistent with the plan of the company as we have held it to be. But suppose we are wrong in this, and that what is said amounts to misrepresentation and fraudulent misrepresentation; so far as the present ca'se is concerned, it will avail the defendants in error nothing, for the reason that the court has not placed its order appointing a receiver on any such ground. On the contrary, it has distinctly held, that .if the individual holders of certificates were induced to purchase them by the fraudulent representations of the selling agent, or of the .officers of the company, it might be ground for a rescission of the contract, so far as they were concerned, but it would not necessitate the appointment of a receiver to take charge of the entire assets of the company, unless it were shown that a receiver for the entire assets was necessary for the protection of the rights of such persons; and that if the scheme of the company is legal and its contracts valid, if any deception was practiced upon the certificate-holders it would not require the appointment of a receiver. So far as these misrepresentations may have been made by the agents of the company, it was not bound by them, if they were at all in conflict with what was stated in the certificate, because in the face of each certificate is a distinct stipulation that no statement made by any one, except as therein set forth, shall be binding upon the company. This language is broad enough to apply even to statements made by the officials of the company. The contract relations between the certificate-holder and the company are absolutely controlled by the certificate, as long as it stands as evidence of the contract.

Let it be conceded that the literature of the company which was sent out and authorized by it was calculated to impress upon those who read it that contracts of a nature not provided for in the certificate were intended, and that the applicants for certificates made their applications expecting to obtain certificates of a character indicated by the literature and different from those indicated by the certificates; when they received the certificates with the statement in them above referred to, and could see by a simple reading that the certificate was different from what was contained in the literature, they would be bound by the terms of the certificate after they became acquainted with what was contained therein, or a reasonable and sufficient time elapsed for them to acquaint themselves with its contents after the certificate had come into their possession. The certificate was the evidence of the contract. When it was delivered to the certificate-holder, it was his duty to read it and ascertain what was the contract relation that existed between himself and the company; and if the literature of the company proposed a different contract, he could, within a reasonable time, have claimed a rescission and recovered back what he had paid, if the contract contained in the certificate was substantially and materially different from that proposed in the literature of the company. Certainly he can not come into court as a certificate-holder, and claim rights under a contract, not only not contained in the certificate, but directly antagonistic to the statements made therein, after having received and treated the certificate as evidence of the contract between himself and the company. The plaintiffs do not ask •either a rescission or a reformation of the contract. • They claim that they are holders of the certificates as issued, and as such only do they pray for relief, and the relief asked for is not of a nature which the contract contained in the certificate would authorize. It may be that they have been deceived 'and defrauded and wronged by the misrepresentations of agents, or even of the officers, contained in authorized literature of the company. If so, they should not come into a court of equity endeavoring to use their position as certificate-holders to enforce a contract not contained in their certificates; but their appropriate remedy was in due time to have applied for a rescission of the contract, and ask that the company be required to pay to them the sums which it and its agents had received from them as a result of the fraud which had been perpetrated upon them. Fraud on the part of the agents and officers of the company would be a sufficient ground upon which to base an application for a rescission of the contract, but fraud of the worst type would not authorize a court of equity, in the absence of a prayer for a reformation of the contract, to decree that the certificates issued, providing a contract of one character, should, on account of the misrepresentations made at the time they were issued or applied for, be declared a contract of an entirely different character.

It appears from the evidence that a large part of certificates of Class B are outstanding, and that the company has ceased to issue certificates of this class. At the timé this suit was filed the com-, pany was issuing certificates known as Class C. A copy of one of such certificates is as follows:

“ In consideration of the written application for this Certificate {a copy of which is on the back of this Certificate) and the statements and agreements therein contained, which are hereby made a part of this contract, the Equitable Loan and Security Company hereby promises to pay to the order of-of --- at the Home Office of the Company, Five Hundred Dollars subject to the following express terms and conditions:

“ 1st. That the holder hereof agrees to and shall surrender this Certificate for payment and cancellation whenever the same shall be called before maturity, upon the payment to him of its then redemption value, which value shall be the full amount of all installments paid hereon, with a guaranteed profit of Eight per cent, per annum (which profit must be earned before this certificate shall be eligible for redemption) together with its proportionate share of all profits or accumulations arising from interest, fines and lapses in excess of Eight per cent, per annum.

“ 2nd. That of each and every installment paid hereon the maker hereof shall place Fifty per cent, and all net receipts from fines to a redemption fund, which may be used: (1st.) For paying off Certificates prior to their full maturity according to the terms herein set forth; (2nd.) For paying Certificates in the order and manner that they shall mature at the end of the full term; (3rd.) For paying to the legal representatives of the deceased holder hereof the full amount of all installments paid hereon with a guaranteed profit of Eight per cent, per annum together with its proportionate share of all profits or accumulations arising from interest, fines and lapses in excess of Eight per cent, per annum, Provided, this Certificate is in good standing and legal and sufficient notice of such death is furnished and this Certificate satisfactorily released and surrendered to the maker hereof within ninety days after death occurs; otherwise this Certificate can not be so surrendered, and all conditions will be enforced as provided for in section fifth hereof; (4th.) For paying all licenses and taxes : Thirty per cent, to a reserve fund which shall be used and held for the protection of all live outstanding Certificates ; and the remaining twenty per cent, and all transfer fees shall be used for the expenses of the Company and such other pur.poses as the Directors may approve.

“ 3rd. That the holder has paid One Dollar and Fifty cents here-for and agrees to pay to the maker hereof at its Home Office, without any other or further notice, an installment of One Dollar and fifty cents on the fifth day of each and every succeeding month hereafter, until One Hundred and Sixty-eight installments shall have been thus paid, time being of the essence of this contract; then this Certificate shall become due and payable within thirty days from the date of said last payment for its full face value of Five Hundred Dollars.

“4th. That in order to prevent favoritism or partiality being shown by the Company, Certificates paid before maturity shall be paid by numbers; and only according to the multiple table which is printed on the back hereof, which table is hereby referred to and made a part of this contract.

“ 5th. That a failure to pay said installments when due subjects the holder hereof to a fine of 15 cents per month for each month on every installment in arrears, and if any installment shall remain unpaid for six months, then this Certificate shall become null and void, and of no value, and the holder hereof shall and does forfeit all payments (including fines) made hereon; Provided, that at any time after eighty-four monthly installments' have been paid hereon, the holder hereof may surrender this Certificate, if it is in good standing, and receive for it a new, non-assessable and non-forfeitable Certificate for the full amount of installments that have been paid hereon, with interest at the rate of 4 per cent, per annum, which new Certificate shall bear the next unsold number and shall bear interest at the rate of 4 per cent, per annum and be payable on or before the expiration of the tontine period, from the time it is then issued.

“ 6th. That no transfer hereof shall be valid or binding on the maker hereof until it has been approved hereon by the Secretary and recorded on the books of the Company at its Home Office, and a fee of One Dollar and Fifty cents paid for making such record. Each and every transferee hereof accepts this Certificate subject to all the stipulations herein. This Company shall have a prior lien upon this Certificate for any indebtedness due said Company by the owner hereof as shown by the books of this Company.

“7th. That no statement made by any one except as herein set forth shall be binding on this Company.

“ 8th. That no part of the reserve or redemption funds can ever be loaned to any officer or director of this Company.

“ 9th. That the funds of this Company may be loaned to the holders of Certificates, and otherwise invested, upon terms and security to be approved and accepted by the Board of Directors.

“ 10th. That no officer or director of this Company, or any member of his or their families, can purchase or own this Certificate.

“ In Witness Whereof; this Company has caused this Certificate to be executed in its name and behalf, under its corporate seal, by its President and Secretary.” (Dated and signed,)

The multiple table referred to in this certificate is the same as that set out above, except that at the bottom of the table appears the following: “ If at any time any multiple number next in the regular order of redemption should not have to its credit a sufficient per cent, profit to permit of its redemption according to the terms of this certificate, payment may revert back to the lowest numeral and multiple numbers coming next in order, and on which the profit is sufficient to justify their redemption, and this process continued until the suspended multiple numbers shall have enough earned profit apportioned to their credit to render them eligible for redemption, according to thoir terms, when they may be called.”

If the contracts contained in certificates of Class B are lawful, it follows necessarily that the contracts contained in certificates of Class C would be lawful. In fact it was practically conceded that the issue in this case depended upon the validity of certificates of Class B. Upon the invalidity of these certificates the court based its order appointing a receiver, and we think it is evident that the judgment appointing a receiver of the entire assets of the company was not based upon the certificates of either class A or class C. The court based its decision appointing a receiver solely upon the ground that the scheme of the company was unlawful, and not upon the ground that the company was not carrying out in good faith the scheme authorized by the charter and indicated by the contracts made with the certificate-holders. We are constrained, for the reasons above giveh, to disagree with our learned brother in reference to the legality of this scheme. We have set forth what we believe to be the true interpretation of the contract. If the company is not keeping within the limits of its charter powers, or if it is not managing the assets in the manner provided in its contracts with the certificate-holders, of course they have their appropriate remedy to bring the company within the limits of its charter and the scheme as set forth in the certificates. Whether the company has exceeded its charter powers, or whether it has managed the assets of the company in any improper way, it is not incumbent upon us to determine at the present time. The finding of the judge to the contrary precludes any inquiry into the subject so far as the present case is concerned. In our opinion the judgment must be reversed on the ground that the court erred in its interpretation of the contract; and as upon this ground alone a receiver was appointed, the.order appointing the receiver should be vacated and the assets of the company restored to the possession of the officers of the company, to be administered by them in accordance with the charter, the contracts, and the law of the land.

From the view we have taken of the case, it is unnecessary for us to investigate the question whether a court of equity would under any circumstances take charge of the assets of a lottery company at the instance of one who knowingly went into the unlawful scheme. On first impression, it would seem to us that the purchaser of a lottery ticket was in pari delicto with the seller; and if the scheme of the company was as the learned judge of the court below held, the holders of certificates would be in no better position than the purchasers of lottery tickets'. Upon this question, however, we refrain from expressing any matured opinion. Certain it is, however,, that if the scheme of the company was in the nature of a lottery, and a court would, at the instance of one who went into the scheme, take charge of the assets of the company, then •every person who ever paid one cent into the company would be entitled to participate in the distribution of these assets, even though by reason of his default his certificate had been forfeited. The assets should not be administered for the benefit alone of certificate-holders who are in. They obtain no rights under their certificates, because the contracts would be illegal. If they have -any rights, they arise from the fact that they paid money into an unlawful enterprise, and the holders of certificates-who have paid in and lapsed are just as much entitled to participate as those who have paid in and have not lapsed. If a court of equity will take charge of these assets, in order to prevent them from being used for this unlawful business, these assets should be returned to the true owners of the fund, that is, the holders of certificates at the present time and all persons who have contributed to the fund at any time. One reason why it appears to us that it is not the province of a court of equity to soil its hands in distributing a fund of this character is, that after all persons who have ever contributed to the fund have been repaid the amount contributed, with lawful interest thereon, and even the costs of suit and of the receivership have been paid, there will probably be remaining a surplus, in the hands of the court, and it would be .necessary to determine to whom this surplus belonged. A court of equity would certainly not give this fund to the holders of the lottery tickets, as it were. If it did, it would encourage people to buy lottery tickets, and would be giving to those who bought the tickets a part of the profits of the illegal enterprise. If the fund remaining in the hands of the court were not given to the purchasers of the tickets, it would have to be divided among the operators of the illegal scheme; and it would certainly be an unusual spectacle for men who had been promoters of a lottery scheme, and who had had a fund raised by them taken from them by a court of equity, to wait around the doors of the court until the fund had been administered, to see how much a court of equity would return to them as the promoters of the scheme. At no time in the history of the court of chancery have persons in possession of a fund procured by unlawful means been known to wait around the doors of the court for the time to arrive when a portion of such a fund should be returned to them by the court, for the reason that the owner could not be found and the court must make some disposition of it. The doors of a court of equity are closed against such persons, and should never open to admit a fund which would have to be so administered that a time would arrive when the law-breaker, loitering at the doors of the court in anxious solicitude as to the time and terms of the final decree, must be sent for in order that the court may deliver to him,a part of the fund remaining unadministered in its hands. The unadministered part of the fund in such cases can not, consistently with any rule of law or equity, be paid to' those who were enticed into the illegal scheme; and a court of equity has no right to confiscate even the property of a law-breaker; and at the end of litigation of the character indicated by the above reflections, the only course open to the court would be to call in the transgressor of the law and deliver to him a fund which, according to the rules of law and equity, could not with propriety be delivered to any one else. However, as said above, we do not decide this question. These are simply some reflections growing out of the possibilities that might result from an attempt by a court of equity to administer a fund which in its inception and growth is tainted and impure. It does now seem to us that the only court that should ever open its doors to him who would improve his fortune by methods not authorized by law is that court which has jurisdiction to punish offenders against the law. Of all courts, a court of equity should not be opened to the lawless, to settle controversies concerning their spoils. The lawless should neither be allowed to pass the threshold of such a court, nor permitted to/linger around its portals in anticipation of a benefit to be derived from its decrees.

Having reached the conclusion that the individuals engaged in this enterprise are not subject to the criticism that they are the managers of a lottery or promoters of a scheme which is unlawful, we are saved the necessity at the present time of deciding what would have been the rights of these certificate-holders if their contentions had been sound.

Judgment reversed.

Fish and Candler, JJ., concur. I/umphin, P. J., absent. Simmons, C. J., and Lamar, J., dissent.

Lamar, J.

I can not assent to the majority opinion, and have attempted in the headnotes to indicate, as briefly as possible, what I conceive to be the law applicable to-this case, in which, I am authorized to say, Chief Justice Simmons concurs. The reporter has been requested to incorporate in the official report the learned and able opinion of his honor, Judge J. H. Lumpkin, of the Atlanta circuit, and this makes it unnecessary to go into any elaborate discussion of the authorities, or to set out at greater length the facts appearing in the record.