^-t- f:^ ^!>'^^'"^' Cornell University Library HG2051.U52S8 South Dakota system of rural credits .. 3 1924 014 030 781 South Dakota System of Rural Credits PIERRE, SOUTH DAKOTA HOW TO SECURE A LOAN From the Rural Credit Board Information for the Prospective Borrower upon Farm Land as to the Working of the Rural Credit Act BOARD OF DIRECTORS PETER NORBECK, Governor C. M. HENRY, Rural Credit Commissioner A. W. E>»^ERT, Treasurer J. E. ZIEBACH, Vice President ALFRED ZOSKE, Secretary WHAT THE RURAL CREDIT SYSTEM IS TRYING TO DO The Rural Credit System provides for the farmer an oppor- tunity to enjoy the same credit advantages and low interest rates that have long been afforded the railroads, large industrial corporations and other lines of business. Let it be clearly un- derstood that the farmer borrows his money direct from the State of South Dakota. The State of South Dakota is putting the credit of the entire State behind the bonds issued by it to get cheap money for the use of the farmer without profit to the State. The State expects to sell bonds to obtain the funds for the pres- ent and future needs of the borrovvring farmers. This system wos organized for the purpose of giving to the farmers cheap money and long time and to aid in the settling up of our State by inducing immigration from the outside, also to help improve conditions of our present residents. If there is ary thing in this pamphlet which is not clear to you, write to the Commissioner of Rural Credits, Pierre, South Dakota. / ' ' 7 ' HOW THE FARMERS CAN GET OUT OF DEBT Plan of the Rural Credit System There is nothing complicated about the Rural Credit Loan Act. It provides a simple plan through which the borrowing farmer may secure a loan on adequate security at lov/ interest rates without paying commissions or being burdened with re- newals of the loan. This is accomplished by what is known as the amortization plan. Amortization consists of the payment of fixed and regular installments which pay both principal and interest in a given term of years. The addition of a small amount to the interest payment reduces the principal of the debt with each successive payment so that the borrower is paying interest on a constant- ly decreasing principal. The borrower cannot fix the rate of interest, for this is de- termined by the rate of interest the Rural Credit Board must pay in order to sell its bonds. If the rate of interest which the borrower must pay is 5i/^% and the borrower has thirty years in which to pay off his mortgage, then he must pay $68.81 every year on each $1000.00 he borrows. He will pay proportionately for a smaller or larger amount. If the rate of interest is 6%, he must pay $72.61 each year on each $1000.00, paying proportionate- ly for a smaller or larger amount. It should be remembered, as previously stated, that the bor- rower has the privilege of paying off his loan at any interest period, in whole or in part, at any interest date after five years. REQUIREMENTS FOR A LOAN 1. The applicant must be an actual resident of the State of South Dakota and the owner or prospective owner of farm land offered as security for the loan, loans to be made on first mort- gages only, running to the State of South Dakota. 2. The applicant must be a person who is at the time, or shortly to become, engaged in the cultivation and development of the farm land mortgaged. 3. The land offered for security will be appraised upon the basis of its agricultural or ranch value. The Rural Credit Board is authorized to loan a maximum amount of seventy per cent of the appraised value of the land, plus an additional amount of forty per cent of the insured value of the improvements upon the land, provided that the value of the improvements shall in no case exceed fifty per cent of the value of the land and pro- vided further that in no case shall any farm improvements be considered worth more than Five Thousand Dollars; provided further that in no case shall the total loan made be in excess of the average assessed valuation for the three preceding years, as ascertained from the County Auditor in the County where the land is situated. 3 4. The money borrowed must be applied to certain definite uses, as follows: (a) To provide for the purchase of farm lands ; (b) To provide for the purchase of equipment, ferti- lizers and live stock necessary for the proper and reason- able operation of the mortgaged land; (c) To provide for the building and other improve- ments on farm lands; (d) To liquidate the indebtedness of the owner of the land mortgaged existing at the time of the organization of said Board, or indebtedness subsequently incurred for the purposes mentioned heretofore. 5. The smallest amount of loan which may be made is Five Hundred dollars, the largest amount of loan which may be made is $10,000.00. Territorial Limits The South Dakota Rural Credit Board is limited to making loans only in the State of South Dakota. Irrigated Lands The Board can loan money on and take security for such farm lands subject to liens or assessments for drainage, recla- mation or irrigation purposes, payable in installments not due at the time of making such loan and the mortgage taken to se- cure the loan, shall, notwithstanding the said liens or assess- ments, be deemed a first mortgage within the meaning of this Act, provided, however, that the amount of said liens or assess- ments shall be considered by the Board in determining the amount to be loaned on such farm lands. VALUATIONS and TITLES The basis of valuation is the ordinary basis used for making farm loans. In arriving at it both the selling value of the land and its productive value will, of course, be given consideration, the latter being the principle factor. Abstracts of title, or Torrens title of registration adopted under the State lav/ will be accepted by the Rural Credit Board. Loans may be paid up in whole or in part in any multiple of One Hundred Dollars at any interest paying date after five years. QUESTIONS ANSWERED The following are some of the questions commonly asked about the South Dakota Rural Credit Farm Loan System, and the answers given by the Rural Credit Board. Q. Who may borrow money from the South Dakota Rural Credit Board? A. Only persons who are actual residents of South Dakota 4 and who are the owners, or about to become the owners of farm lands, or who are or intend shortly to become engaged in the culti- vation and development of the farm land mortgaged. Q. What should a person do who wishes to make a loan? A. He should apply to the Rural Credit Commissioner at Pierre, South Dakota, for an application blank. Q. What is the largest and smallest amount of loans? A. No one farmer can borrow more than Ten Thousand Dollars nor less than Five Hundred Dollars. Q. Can a man borrow ten thousand dollars and his wife borrow ten thousand dollars more? A. No, they cannot. An applicant's wife, or husband, as the case may be, must sign the papers also, making her a party to the transaction. Q. How are interest and payments of principal to be made? A. The borrower is expected to remit the amount of his annual payment to the Rural Credit Board at Pierre on or be- fore the date it is due. Q. May a borrower pay off his loan before maturity? A. He may pay all or any part at any interest paying date after five years. Q. Do I have to join an association to be able to get this money from the State? A. No, you borrow individually and directly from the State; there is no half-way house between you and the money. Q. Are there any agents for the Rural Credit Board and are there any commissions paid for procuring loans? A. No, there are not. Q. Do I get all of the money that my mortgage calls for? A. You get all the money. None of it is retained by the State. Q. Then I do not have to become liable for any other far- mer's loan? A. No, your liabitity is your own and is for the amount of your note only. Q. Suppose a borrower fails to meet his payments, what is apt to happen? A. If in the judgment of the Directors of the Rural Credit Board the failure to pay interest is unavoidable through crop failures or sickness, or other unforseen emergencies, it is with- in the power of the Board to carry a borrower for a reasonable length of time, say one or two years, but the borrower is requir- ed to pay eight per cent interest on all overdue payments while he is in default. Q. Suppose I own a farm worth, say Ten Dollars per acre, and in a few years the farm becomes worth Twenty Dollars per acre, can I double my loan? A. If you double the appraised value after five years you can double the loan. Q. Can a prospective borrower give a second mortgage af- ter he has given a mortgage to the State on the amortization plan? A. Yes, it ought to be much easier to place a second mort- gage because the first mortgage is gradually being reduced each year and payments made thereunder are so small as not to men- ace the security of the second mortgage, but the law does not allow the Rural Credit Board to loan on second mortgages. Q. What is the object in limiting the size of the loans? A. The State wants to benefit the actual farmer and not the speculator. Limiting the size to Ten Thousand Dollars pre- vents the use of this Act for the purpose of speculation and monopoly. Q. Who passes on the value of the land offered as security? A. The borrower is supposed to procure two appraisers of the land who are thoroughly acquainted with the land to be mortgaged and who are in no way interested in the loan or the land. The value of the land and the desirability of the loan will be made by an examiner representing the Rural Credit Board. Q. What percentage of the value of the security may be borrowed ? A. Up to seventy per cent of the appraised value of the land and not to exceed forty per cent of the insured value of the improvements. That is, if your land is appraised at Ten Thou- sand Dollars, you would be entitled to borrow Seven Thousand Dollars and if your improvements are worth Two Thousand Dollars, you could borrow Eight Hundred Dollars more, or a to- tal of Seventy Eight Hundred Dollars, providing, of course, that the average assessed value for the three preceding years did not fall below this amount. Q. Can the money borrowed be expended for any purpose? A. No, the money must be expended only to discharge in- debtedness incurred for the purchase of land, for the payment of a mortgage or debt already existing, for the purchase of live stock, for the making of improvements on the farm lands mort- gaged, and for indebtedness existing at the time of the passage of the Rural Credit Act, or indebtedness subsequently incurred for the purposes mentioned above. Q. What is the object of these limitations? A. It is the policy of the law to benefit only the person who is at the time, or shortly to become engaged in the cultiva- tion and development of the farm land, and especially the far- mer of the small sized farms who is in need of credit. Q. What constitutes the person who is at the time shortly to become engaged in the cultivation and development of the farm land mortgaged? A. That person is one who conducts the farm and directs its operation, cultivating the same with his own hands or by means of hired labor. An owner to borrow under the Rural Credit Act must be responsible financially and otherwise for the cultivation or development of his land. Q. What. is the meaning of equipment? A. Equipment consists of implements needed in the con- duct of a farm or ranch necessary to its operation. It might consist of horses, as well as machinery or other implements. Q. What is the meaning of improvements? A. Anything in the form of permanent structures or any permanent change tending to increase the productive value, such as fencing, draining, building or sinking wells. Q. Who furnishes the abstracts to the land to be mort- gaged? A. Each borrower is required to furnish his own abstract. He must stand the expense of preparing the same, Q. Does the Rural Credit Board desire the abstract with the application ? A. No. the Rural Credit Board does not want the abstracts until the party is notified of the approval of their loan. When abstracts are requested, they should be continued to date and have opinion of a reliable attorney attached thereto. Q. How long, after making application, does it take to close a loan? A. This depends upon time application is received. If the application is properly made and does not have to be returned for corrections, it is acted upon at the following meeting, which will in most cases, be less than thirty days. After approval, we im- mediately notify applicant, who should at once procure his ab- stracts, have them continued to date, have attorney's opinion attached, and forward them to this office. If the same is found satisfactory, we proceed to close the loan. Q. How much can be borrowed on a quarter section of land in any particular county? A. We cannot advise specifically, until we have the applica- tion and facts, but the law provides that we cannot loan to ex- ceed 70% of the actual value of the land nor to exceed the average assessed valuation of the land for the three preceding years. Q. Does applicant have to pay off mortgages before he can procure his loan? A. In most cases, loans are closed through a bank, designat- ed by the borrower, and when the papers are drawn up, we for- ward them all to the bank. Through them, the borrowerr pays his incumbrances on the land with the money we have sent them. Q. What is the basis for appraising lands? A. The appraisement of a farm should represent the best judgment of the parties selected by the borrower as to the value of the land in question, the principle factor being the produc- tivity of the land when used for agricultural purposes and the 7 location and desirability when used for ranch purposes, both taking into consideration the salability of the land and the pre- vailing prices in that community. Q. Will the Rural Credit Board make any charge for exam- ination of abstracts of title? A. The Board requires the borrower to furnish a local attor- ney's opinion to be attached to each abstract, the borrower to pay for the opinion. 5'/2% AMORTIZATION TABLE Approved by the South Dakota Rural Credit Board Payment No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Payment Interest $6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 6.88 $5.50 5.42 5.34 5.26 5.17 5.08 4.98 4.87 4.76 4.65 4.52 4.39 4.26 4.11 3.96 3.80 3.63 3.45 3.26 3.06 2.85 2.63 2.40 2.15 1.89 1.62 1.33 1.02 .70 .36 Applied on Principal $1.38 1.46 1.54 1.62 1.71 1.80 1.90 2.01 2.12 2.23 2.36 2.49 2.62 2.77 2.92 3.08 3.25 3.43 3.62 3.82 4.03 4.25 4.48 4.73 4.99 5.26 5.55 5.86 6.18 6.52 Principal StiU Unpaid $98.62 97.16 95.62 94.00 92.29 90.49 88.59 86.58 84.46 82.23 79.87 77.38 74.76 71.99 69.07 65.99 62.74 59.29 55.67 51.85 47.82 43.75 39.09 34.36 29.37 24.11 18.56 12.70 6.52 00.00 To make a computation of any multiple of 100, or fraction thereof, such as 400 or 600, merely multiply the above figures in each column by 4 or 5, as the eaas may be, dropping the minor and adding the major fractions. CIRCULAR NO. 4 The Laws of South Dakota ESTABLISHING A System of Rural Credits FROM Chapter 14 of Political Regulations— Revised Code of 1919 as amended by Chapter 304, Sessions Laws 1919, ALSO Supreme Court Decision in case of Schaaf vs. South Dakota Rural Credit Board 39 South Dakota Reports 377 164 N. W. Reporter 964 Issued by the Rural Credit Board Pierre, South Dakota. PETER NORBECK, Governor - - - President C M. HENRY, - - Rural Credit Commissioner A. W. EWERT, Treasurer J. E. ZIEBACH, Vice President ALFRED ZOSKE, Secretary CHAPTER 14. RURAL CREDITS 10150 Words and Phrases Defined. 10151 Board — Membership. 10152 Oath and Bond. 10153 Duties of Board. 10154 Supervision. 10155 Seal. 10156 Secretary — Duties. 10157 Treasurer — Duties. 10158 Commission to Investigate Loans. 10159 Loans. 10160 Releases. 10161 Mortgages. 10162 Bonds. 10163 Legal Adviser. 10164 Expenses of Making Loan. 10165 Reserve Fund. 10166 Books and Records. 10167 Property Held in Trust. 10168 Exemption from Taxation. 10169 Foreclosures. 10170 Banks as Depositaries. 10171 When Treasurer Not Liable. 10172 Surety Bonds. 10173 Cost of Bond. 10150. WORDS AND PHRASES DEFINED. The following words and phrases in this chapter shall, unless inconsistent with the context, be interpreted as follows: 1. The phrase "first mortgage" shall be held to include such- classes of first liens on farm lands as shall be approved by the South Dakota rural credit board and the credit instruments secured thereby. 2. The phrase and words "farm land," "farm" and "farms" shall be held to include: Lands used principaly for raising agri- cultural products; for dairying purposes; and lands or ranches used principally for livestock purposes. 3. The word "board" shall mean "South Dakota rural credit board." Source: § 1, Ch. 333, 1917. 10151. BOARD MEMBERSHIP. For the purpose of foster- ing and encouraging agriculture, dairying and live stock raising in this state and the development and improvement of farm lands, the sytem of rural credits, heretofore established, shall continue to be controlled and managed by the "South Dakota rural credit board," which shall have charge of the execution of this chapter and all acts amendatory thereto; shall establish and maintain a system of rural credits; and shall maintain its office at the seat of gov- ernment of this state. Such board shall consist of five members, one of whom shall be the governor of this state, who shall be ex-officio president of the board, and four members to be ap- pointed by the governor. The four members to be appointed by the governor shall be citizens of the state, persons of experience in finance, loaning money and determining real estate values, and shall be so selected that the board will not be composed wholly of persons who are members of or affiliated with the same political party or organization. One member shall be designated and known as the rural credit commissioner and shall receive an annual salary of five thousand dollars, together with all actual necessary traveling expenses while discharging the duties of his office. Another member shall be designated as treasurer of the board, and shall receive annually a salary of two thousand dollars, together with actual necessary traveling ex- penses while discharging the duties of his office. Of the two other members, appointed by the governor, one shall be named by the board as vice president, and each shall receive a per diem of ten dollars and actual necessary traveling expenses while dis- charging the duties of his office. The board shall designate one of its members as secretary. Each member of the board except the governor, in office when this code takes efi'ect, shall continue therein until two years after the expiration of the term for which he was appointed, and such term in each case shall be extended accordingly; thereafter as such extended term of each expires a successor shall be appointed for a term of six years. All vacancies shall be filled by appointment by the governor, and the governor may remove any appointed member at any time when, in his judgment, he has failed to properly and efficiently dis- charge the duties of his office. The member designated as vice president shall, in the absence or disability of the governor, be the presiding officer of the board. The commissioner shall reside at the seat of government and shall devote Ms entire time to the duties of his office. Source: §§ 2, 3, Ch. 333, 1917. § 1, Ch. 304, 1919. 10152. OATH AND BOND. Each member of such board, except the governor, before entering upon the discharge of his official duties shall take and subscribe the constitutional oath and furnish a bond, with sufficient sureties, to be approved, re- corded and filed as the official bonds of other state officers, in the penal sum of not less than five thousand dollars, conditioned for the faithful performance of the duties of his office, the prem- ium of which bond shall be paid by the state upon compliance with the provisions of section 7040; provided, that the governbr may from time to time require any such member to furnish an additional bond or undertaking in such sum as he may direct, and such bond shall always be sufficient to indemnify the state against loss. Source: § 4, Ch. 333, 1917. 10153. DUTIES OF BOARD. It shall be the duty of such board to maintain, at the seat of government of this state, the system of rural credits heretofore established; it shall have auth- ority to provide for its office necessary furniture, fixtures, sta- tionery and supplies; to adopt rules and regulations, not incon- sistent with the laws of this state, proper and necessary for the conduct of its business; and to receive applications for farm loans, approve the same and borrow money on the good faith and credit of the state, to be used in making farm loans as pro- vided in this chapter; to receive from the treasurer of the state money appropriated for the maintenance of such system; to ac- quire and dispose of such property, real and personal as may be necessary or convenient for the transaction of its business, pro- vided that such property shall be taken for a pre-existent debt; to issue warrants or bonds payable by the state, bearing such rates of interest as may be fixed by the board, and sell the same in such amounts as may be necessary or convenient for the transaction of its business provided, the amount of cash on hand and in banks together with the amount of mortgages outstand- ing, computed at their face value, shall never, at any time, be less than ninety-five percent of the amount of bonds and war- rants, outstanding, computed at their face value. Before issuing any such warrants or bonds it shall be the duty of the board to furnish the governor a financial statement, showing the condition of the business of the board, and such other and further infor- mation as may be required by him, which statement shall be filed in the office of the governor and a copy thereof shall then be transmitted to the secretary of state, to be filed and kept by him as a permanent record of his office; and whenever any such warrants or bonds are issued by the board, it shall be the duty of the board to promptly submit to the governor a full statement thereof, which statement shall be filed in his office and a copy thereof shall be transmitted to the secretary of the state, to be filed in his office as a permanent record; to employ, by and with the approval of the governor, such assistants, clerks, laborers, attorneys and other emploj^ees as it may deem necessary to con- duct its business; to fix the bonds, salaries or fees of such em- ployees, and to fix the fees, costs and charges to cover the ex- penses of the board in making loans; to define the duties of the officers, agents or employees of the board, which officers and employees shall be under the direction of the board in all matters not inconsistent with the provisions of this chapter; and to make to the governor, annually, at the time and in tlie .manner pro- vided by Sections 6922 and 7067, a full report of its business for the preceding fiscal year, with such general information and recommendations as may to the board seem proper. It shall be the duty of sucli board to make a monthly statement of its busi- ness upon such form as may be required ty tlie executive acr countant, and it shall be the duty of such accountant to audit such statements and make a written report thereon, which shall be filed in his office as a permanent record, a copy of which shall be fortwith transmitted to the governor and to the secretarv of such board. Source: § 5, Ch. 333, 1917; § 1, Ch. 58, 1918; § 2 Ch. 304, 1919. > ^ , Bonds issued by state for rural credit fund loans, payable out of funds loaned by state to its people secured by land mort- gages, held not a state debt. In re Bural Credits Law, 38 S D 635 (appendix) 162 N. W. 536. Rural credits law is not in violation of fourteenth United States constitutional amendment nor of state constitution as to limitation of state indebtedness. Schaaf v. South Dakota Rural Credits Board, 39 S. D. 377, 164 N. W. 964 Mandamus issued to compel auditor to pay voucher certified to rural credit board without verified statement. State ex rel, Norbeck v. Handlin, 39 S. D. 331, 164 N. W. 103. 10154. SUPERVISION. The rural credit commissioner shall be the chief executive officer, and shall have the general supervision, under and by direction of the board, of the business, officers and emploves of such board. Source: § 6, Ch. 333, 1917. 10155. SEAL. The board shall obtain and keep a seal. The design of the seal shall be as follows: A circle within which shall appear in the center the word "Seal." Between the lower and upper edges of the circle, properly divided, shall appear the words: "South Dakota Rural Credit Board," "State of South Dakota." Source: § 7, Ch. 333, 1917. 10156. SECRETARY— DUTIES. The secretary of such board shall keep the seal of the board and shall affix the seal, with his attestation, to all instruments or papers whenever the board shall so direct. He shall keep a record of the proceedings of the board, and such books and records as are necessary or convenient for the conduct of the business of his office, and shall do and perform such other acts as may be required of him by the board. Source: § 8, Ch. 333, 1917. 10157. TREASURER— DUTIES. It shall be the duty of the treasurer of such board to keep the books of accovmt of such board; to receive and keep safely the money of such board or of the state that may come into his possession, and to keep in his care and custody all promissory notes, mortgages, or other securities or evidences of indebtedness, and muniments of title, acquired or received by such board for money loaned on real estate; to sign all bonds and warrants; to render monthly state- ments to the board of the transactions of his office; and to do and perform any and all other acts as may be directed by the board. Source: § 9, Ch. 333, 1917. 10158. COMMISSION TO INVESTIGATE LOANS. Before any mortgage loan is made by such board the application there- for shall he referred to the rural credit commissioner, who shall make, or cause to be made, an appraisal of and a written report upon the land offered as security for such loan. No such loan shall be made unless such written report is filed with the secre- tary of the board and considered and approved by the board. Source: § 10, Ch. 333, 1917. • 10159. LOANS. Such board shall make loans only upon the following terms and conditions: 1. Each loan shall be secured by a duly recorded first mort- gage on farm land Avithin this state. 2. Every such mortgage shall contain an agreement pro- viding for the repayment of the loan on on amortization plan by means of annual or semi-annual installments so computed as to pay the interest on the loan according to the terms of the mort- gage, and also such amounts to be applied on the principal as will terminate the debt within an agreed period of not less than five years nor more than thirty years; provided, that after five years from date of such mortgage additional payments for part or all of the principal may be made on any annual or semi-annual pay- ment date under such rules and regulations as the board may nrescribe- and provided, further, that on the apphcation of the borrower' the board may, in its discretion, provide in the mort- oase for the payment of interest only during the first five years, and thereafter for the payment of both interest and principal on the amortization plan. 3 The Board mav loan money on, and take as security for the same farm lands subject to liens or assessments for drainage reclamation or irrigation purposes, payable in install- ments, not due at the time of making such loan, and the mort- gage taken to secure the loan shall, notwithstanding such hens or assessments, be deemed a first mortgage within the meaning of this chapter; provided, that the amount of such hens or assess- ments shall be considered by the board in determining the amount to be loaned on such farm lands. 4. Such loans may be made for the following purposes and no other: (a) To provide for the purchase ot tarni land; (b) To provide for the purchase of equipment, fertilizers and five stock necessary, for the proper and reasonable operation of the mortgaged farm land, the term "equipment" to be defined by the board. (c) To provide for buildings and other improvements upon farm lands, the term "improvements" to be defined by the board. (d) To liquidate indebtedness of the owner of the land, mortgages existing at the time of the organization of such board or indebtedness subsequently incurred for purposes mentioned in this section. 5. No such loan shall exceed seventy percent of the value of the land, as ascertained and fixed by the board, plus forty per cent of the insured value of the improvements; provided, that for the purpose of this chapter the value of the improvements shall in no case exceed fifty per cent of the value of the land; and provided, further, that in no case shall any farm improve- ments be considered worth more than five thousand dollars. In no case shall a loan be made in excess of the average assessed valuation for the tlircc preceding years, as ascertained from the county auditor in the county where the land is situated, and it shall be the duty of the county auditor, upon request, to forth- with make and mail to the board a certified statement of assessed valuation in compliance with such request. The Board shall re- quire that the property be appraised by competent agents and in no event shall a loan be made except upon the approval of the board. A majority of the board shall constitute a quorum, but no loan shall be made except upon the affirmative vote of three members, and the records of the meeting shall show which mem- bers voted to approve the loan. A reappraisement may be per- mitted at any time in the discretion of the board and such addi- tional loan may be granted as such reappraisal may warrant under the provisions of this section. Whenever the amount of the loan applied for exceeds the amount herein limited, such loan may be granted to the amount permitted under the terms of this section, without requiring a new application or appraisal. • 6. No such loan shall be made to any person who is not at the time, or shortly to become, engaged in the cultivation or de- velopment of the farm land mortgaged. In case of the sale of the mortgaged land the board may permit such mortgage of the vendor to be assumed by the purchaser or by the heirs of the deceased mortgagor. 7. The amount of loans to any one borrower shall never exceed a maximum sum of ten thousand dollars nor shall any loan be for a less sum than five hundred dollars. 8. Every applicant for a loan under this chapter shall make application on a form to be prescribed for that purpose by the board and such applicant shall state the objects to which the proceeds of such loan are to be applied and shall furnish such other information as may be required. 9. Every borrower shall pay simple interest on defaulted payments at the rate of eight per cent per annum and by express covenant in his mortgage deed shall pay, when due, all taxes, liens, judgments, assessments and insurance which may be law- fully assessed against the mortgaged land. Taxes, liens, judg- ments, assessments or insurance, not paid when due and paid by the mortgagee, shall become a part of the mortgage debt and shall bear simple interest at the rate of eight per cent per annum. Every borrower shall keep insured to the satisfaction of the boarrd all buildings, the value of which was a factor in deter- mining the amount of the loan. Insurance shall be made payable to the mortgagee, as its interest may appear at the time of loss and, at the option of the mortgagor and subject to the general regulations of the board, sums so received may be used to pay for reconstruction of the buildings destroyed. 10. Every borrower who shall be granted a loan under the provisions of this chapter shall enter into an agreement with the board that if the whole or any portion of his loan shall be ex- pended for purposes other than those specified in his original application, or if the borrower shall be in default in respect to any condition or covenant of the mortgage, the whole of the loan shall at the option of the board become due and payable forth- with; provided, that the board may permit such loan to be used for any purpose specified in subdivision 4 of this, section. 11. No loan or mortgage securing the same shall be im- paired or invalidated by reason of the exercise of any power of any agent of such board in excess of his powers herein granted, or any limitation thereon or in excess of the powers granted by such board. Source: § 11, Ch. 333, 1917. § 3, Ch. 304, 1919. 10160. RELEASES. When the mortgagor or his successor in terest has fully paid any moftgage, it shall be the duty of the board to furnish him with a proper release or satisfaction there- of, executed by the commissioner and attested by the secretary of the board, with an impression of the seal of the board thereon, and the mortgage papers belonging to such loan, including ah- 8 stract of title and insurance policies assigned, shall be returned to such person. Source: § 12, Ch. 333, 1917. 10161. MORTGAGES. All mortgages and the accompany- ing promissory note or notes taken by such board for money loan- ed shall run to the state of South Dakota as mortgagee or payee, as the case may be, and all titles to property taken by such board shall run to the state of South Dakota as grantee, and any real property so acquired by the board may be sold under such rules and regulations and upon such terms as may be determined by the board; provided, that no such land shall be sold for an amount less than the indebtedness accrued thereon at the time of the acquisition of the title by such board, together with inter- est thereon at the rate of not less than five per cent per annum until sold, unless otherwise provided by law. Source: § 13, Ch. 333, 1917. 10162. BONDS. Bonds provided for in tliis chapter may be issued in denominations of twenty-five, fifty, one hundred, five hundred and one thousand dollars, and in such other denomina- tions as may be determined by the board. They shall run for a specific period or periods, not exceeding twenty years, subject to such prior payments and retirement as the board shall determine, in which case said option shall be expressed in the bonds. They shall have interest coupons attached, payable semi-annually, and shall be issued in series of not less than twenty-five thousand dollars, the amount and terms to be fixed by the board. They shall bear such rate of interest as shall be fixed by the board. The board may also issue warrants when in its judgment deemed necessary, but such warrants shall be subject to the limitations prescribed by this chapter as to the total amount of money bor- rowed. The board shall prescribe rules and regulations concerning the manner in which such bonds and warrants shall be sold, paid and retired under the provisions of this chapter. Such bonds and warrants shall designate on their face the pur- pose for which they are issued and shall be signed by the gov- ernor, the commissioner and treasurer of the board and shall be attested by the secretary of state with the great seal of the state, and shall bind the state to pay the same according to the terms thereof. The form of such bonds and warrants shall be approv- ed by the attorney general. If at any time it shall appear that there may not be sufficient funds in the treasury of such board, to pay such bonds or warrants, or the interest thereon at matur- ity, or when the same shall become due, it shall be the duty of the Tax Commission, upon request of such board, forthwith to levy a tax upon all the taxable property of the state to pay the same when due, which tax shall be extended and collected, in the same manner as other taxes. Whenever such tax shall have been levied, it shall be the duty of the state auditor upon the request of such board to issue his warrant or warrants as such board may direct, bearing interest not to exceed five per cent per annum, and to register the same, drawn on the fund to be deriv-, ed from such special levy in an amount, with interest, provided in such warrants, not exceeding such lew, and deliver the same to such board, and such warrants may be sold by such board All moneys derived from such special levy or from the sale of such special warrants shall be placed in a special fund to be designated "rural credits fund," and shall be used only for the payment of warrants drawn on such fund, and the payment of such bonds, warrants and interest when the same become due. All of such money derived from such special levy is hereby appropriated for the payment of the warrants drawn on such fund and the payment of such bonds, warrants and interest at maturity; and it is further provided that in all matters arising under this chapter the state of South Dakota may sue and be sued as a private individual. Source: §14, Ch. 333, 1917; § 1, Ch. 334, 1917; § 4, Ch. 58, 1918; § 4 Ch. 304, 1919. Law held constitutional and in full force. Schaaf v. South Dakota Rural Credits Board, 39 S. D. 377, 164 N. W. 964. 10163. LEGAL ADVISER. The attorney general shall be the general legal adviser of the board and its officers. Source: § 15, Ch. 333, 1917. 10164. EXPENSE OF MAKING LOAN. The mortgagor shall pay for the recording of his mortgage and other papers con- nected with the loan which may be recorded. He shall furnish to the board proper evidence of title under the Torrens system, or an abstract of title, at his own expense, under such rules as the board may prescribe. Source: § 16, Ch. 333, 1917. 10165. RESERVE FUND. The difference between the rate of interest paid by the state for money borrowed and the interest received by the state for money loaned shall be and constitute a reserve fund. In determining and fixing the rate of interest to the borrower, not less than one-half of one per cent nor more than one and one-half per cent per annum shall be added to the rate of interest contracted to be paid by the state for money borrowed by it. The salaries of the officers and employes of the board and all its expenses shall be paid from the reserve fund. Source: § 17, Ch. 333, 1917; § 2, Ch. 58, 1918. 10166. BOOKS AND RECORDS. It shall be the duty of the board, assisted by the executive accountant and superintendent of banks, to prescribe and maintain in the offices of such board such system of books, records, accounts, receipts, vouchers and documents required to separate and verify each transaction and forms for reports and statements required for the administration of the officers of the board or for the information of the public, as such board and assistants shall deem proper and necessary for the safe and convenient conduct of the business of the board. Source: § 18, Ch. 333, 1917. 10167. PROPERTY HELD IN TRUST. Mortgages, promis- sory notes and other evidences of indebtedness and title to real or other property acquired by such board shall be held in trust for the payment of money borrowed by this state for the purpose of establishing and maintaining such system of rural credits, and shall never be diverted to any other purpose; provided, that such board may invest and reinvest the proceeds of the same in first mortgage loans, as provided by this chapter, when not required for the immediate payment of warrants or bonds, or interest on bonds. 10 Source: § 19, Ch. 333, 1917. 10168. EXEMPTION FROM TAXATION. All mortgages, real and other property taken by such board in its business of loaning, and all warrants or bonds issued by such board in the transaction of its business, shall be free from all general taxes, state, county, municipal and mortgage registration tax, and shall not be subject to state income tax. Source: § 20, Ch. 333, 1917; § 5 Ch. 304, 1909. 10169. FORECLOSURES. Any foreclosure of any of the mortgages provided for by this chapter shall be made in the usual manner, either by action or by advertisement, as the board may direct. In cases of foreclosure it shall be the duty of the attorney general to render all services needed in connection with such foreclosure proceedings, and the costs, fees and expenses now or that may hereafter be provided by law in the foreclosure of real estate mortgages may be taxed in the foreclosure of any such mortgage, in like manner and to the same effect as if the state were a natural person. All sums in excess of the money actually paid out by the board in such foreclosure proceeding shall be paid into the reserve fund and become a part of such when collected. Source: § 21, Ch. 333, 1917. 10170. BANKS AS DEPOSITARIES. The board shall de- signate such banks within the state as it may deem necessary to receive the deposits of the funds of the board, and shall fix the maximum amount to be deposited in each. Such maximum amounts shall in no case be fixed at more than forty per cent of the paid-up capital and surplus of such bank. The board shall require such banks, except state banks, to give bonds for the safe-keeping and return of the deposits. The bond required shall not be less than the amount of the deposit and the treasurer of the board shall not make any deposit in any bank required to give bond before such bond has been given and approved by the board. Such bank shall pay such minimuin rate of interest on such deposits as the board may determine, which interest shall be covered into the treasury of the board and become a part of the reserve fund. The board shall make such other and further regulations for the safekeeping of its fund, deriving interest on its deposits and selling its bonds and warrants as may appear beneficial; and such board may prescribe a reasonable time with- in which the purchase money for bonds and warrants may be drawn by the treasurer from the purchasing bank, and such treasvirer shall not be liable for such funds until directed by such board to withdraw the same. Source: § 22, Ch. 333, 1917; § 3, Ch. 58, 1918. 10171. WHEN TREASURER NOT LIABLE. The treasurer of such board shall not be liable personally upon his official bond for any money that may be lost by reason of the failure or in- solvency of any bank which may be named a depositary by the board; provided, that the bank named as a depositary required to give bonds shall have given such bond and the same shall have been approved by the board before the treasurer has deposited funds of the board therein and the treasurer has complied with further requirements of the board imposed upon him in relation to such deposits. 11 Source: § 23, Ch. 333, 1917. 10172. SURETY BONDS. Whenever a bond or undertak- ing is required by this chapter or by the board to be given, it shall be held to mean a surety bond furnished by a surety com- pany authorized and qualified to do business in this state. Such bonds shall run to the state; shall be as nearly as practicable in the form prescribed in section 6876; and shall be approved by the attorney general. Source: § 24, Ch. 333, 1917. 10173. COST OF BOND. The cost of surety bonds requir- ed by this chapter, furnished by the officers or employes of such board, shall be a part of the general expense of administration and paid by the board. Source: § 25, Ch. 333, 1917. IN THE SUPREME COURT, STATE OF SOUTH DAKOTA. Leshe L. Schaaf , Plaintiff vs. South Dakota Rural Credits Board, and Peter Norbeck, C. M. Henry, A. "W. Ewert, J. E. Ziebach, and Alfred Zoske, mem- bers of and comprising the South Dakota Rural Credit Board Defendants ORIGINAL ACTION. Opinion filed October 27, 1917. (Syllabus and citations omitted). Chas. E. DeLand, Attorney for Plaintiff. C. C. Caldwell, Attorney General, Byron S. Payne, Asst. At- torney General, and John Sutherland, Attorneys for Defendants. McCOY, J.: Bjr application for a writ of prohibition plaintiff has assailed the constitutionality of Chapters 333 and 334, Laws of 1917. These legislative acts by their terms purport to provide for the ostablishment and maintenance of a system of rural credits for the loaning of money by the state upon farm lands within this state; authorizing the state to borrow money on its warrants and bonds secured by the good faith and credit of the state; creating a rural credit board for the management of said rural credit system, and defining the powers and duties thereof; making an appropriation of $200,000 to be used in establishing and main- taining said system and providing for the issuing and negotiation of bonds for the creation of a rural credits fund from which to maintain such system and make loans upon said lands. The ex- pressed purpose of these acts is to foster and encourage agricul- ture, dairying and livestock raising, and the development and im- 12 provement of farm lands within tliis state. It is alleged in the petition and admitted by the defendant that the plaintiff is a tax payer and owns property upon which he could not procure a loan under said rural credit enactments; that said rural credit board created by said enactments is now about to enter into an agree- ment to borrow |200,000 on the good faith and credit of the state, and to issue and deliver and sell the bonds of the State of South Dakota in said amount, the proceeds of such bonds to be used in loaning money on farm real estate, and that said board is also threatening and planning to borrow other and larger sums of money for said purpose upon the faith and credit of the state. It is the contention of plaintiff that said legislative enactments are unconstitutional and void in that they are repugnant to and in contravention of Sections 2, 13, 17 and 18, Art. 6, and Sec. 2, Art. 11, and Sec. 2, Art. 13, and that said laws were not passed in conformity with the provisions of Art. 3, of our state constitution. Section 2, Art. 6, provides that no person snail be deprived of life, liberty or property without due process of law; Sec. 13 provides that private property shall not be taken for public use without just compensation; Sec. 17 provides tliat no tax or duty shall be im- posed without the consent of the people or their representatives in the legislature, and all taxation shall be equal and uniform; and Sec. 18 provides that no law shall be passed granting to any citizen, class of citizens or corporation, privileges or immunities which upon the same terms shall not equally belong to all citi- zens or corporations. Sec. 2, Art, 11, provides that all taxes shall be uniform on all property and shall be levied and collected for public purposes onlj'; and Sec. 2, Art. 13, provides that for the purpose of defraj'ing extraordinary expenses and making public improvements, or to meet casual deficits or failure in revenue, the state maj' contract debt never to exceed with previous debts in the aggregate $100,(i(tO, and no greater indebtedness shall be incurred except for the purpose of repelling invasion, suppressing insurrection, or defending the state or the United States in war. But for the amendment to Section 1, Art. 13, of our state con- stitution, adopted by the people of this state at the general elec- tion in November, 191G, we are of the view that the legislative acts in question would be void and in contravention of several of the foregoing mentioned provisions of our state constitution. Prior to the said amendment of November, 1916, Sec. 1, Art. 13, among other things, read as follows: "Neither the state nor any county, township or municipality shall loan or give its credit or make any donations to or in aid of any individual, association or corporation, except for the necessary support of the poor." Clear- ly this provision of the constitution before its amendment would have prohibited the legislature from enacting a rural credits law such as is in question here. By the 1916 amendment the people of this state undertook to and did authorize the legislature and gave to it power to establish and maintain a rural credit svstem, the said amendment being as follows: "that the state or any county or two or more counties jointly mav establish and main- tain a system of rural credits and thereby loan money and extend credit to the people of this state upon real estate seciiritv in such manner and upon such terms and conditions as mav be'prescrib- 13 ed by general law." This is a broad, sweeping, unconditional, un- limited and unqualified amendment which is the last mandate of the people, in whom resides all fundamental law-making power, authorizing and empowering the legislature to establish a rural credits system and prescribe the terms and conditions thereof. Ordinarily the provisions of a state constitution are limitations upon the plenary power of the state law making body. Under the broad and comprehensive effect of Sec. 1, Art. 13, as it ex- isted prior to 1916, a rural credits law, such as the one in ques- tion, could not have been legally enacted by our legislature in the exercise of its plenary power. To expressly give power to the legislature to enact such a law the said amendment was adopted at the 1916 general election. Under the well established rules governing the construction of constitutions, adhered to by the courts of this country, where a power is expressly granted to a legislative body, everything necessary to effect and carry out the object and purposes of the express power thus granted is also by necessary implication granted to the legislature and the executive officers who are intrusted with the duty of adminis- tering such power. It therefore necessarily follows that every other provision of the state constitution in conflict with the ex- press power thus granted, and its substantial fulfilment, are to that extent modified and qualified and made subservient to the purposes of the express power so granted. We are therefore of the opinion that all the provisions of our state constitution which would otherwise have prohibited the enactment of said rural credits system law have been modified and qualified and made subservient to the express and necessarily implied provisions of the 1916 amendment. That under the provisions of this amend- ment the legislature was empowered and authorized to estab- lish and maintain any adequate system of rural credits suitable to the conditions existing in this state, not in conflict with this amendment, — that by this amendment the people of this state fuUv and completely authorized the legislature to enact any and all laws necessary to establish an adequate and full and complete rural credit system, such as might reasonably be suited to the condition applicable to the state of South Dakota. Approximate- ly there are 49,000,000 acres of land in this state, the greater ma- porily of which is agricultural. About 16,000,000 acres, or one- third thereof, are now in a state of actual cultivation. There is now in this state a mortgage indebtedness upon farm lands of about $25,000,000. It is reasonable to infer that a large portion of this mortgage indebtedness would be the subiect of and come under the operation of the rural credit svstem established under the laAvs in question. When the legislature was expressly clothed with power to establish and maintain a system of rural credits, that meant power to establish any adeauate system appropriate and sufficient, under the existing conditions and needs of the state, to accomplish the purpose for which the amendment was adopted. It is not for this court to say that some other or better way might have been enacted. Some contention has been ad- vanced that the necessary funds for making loans under such system might be procured by some system of direct taxation, and without going beyond the limit of $100,000 indebtedness. We are of the view that such contention is untenable, impractic- 14 able and unreasonable and would not result in creating the one- thousandth part of the funds necessary for an adequate rural credit system, suitable to the needs and conditions existing m the state, such as were in contemplation of the people when adopting said 1916 amendment. We are of the view that the legislature was invested by the 1916 amendment with full power and authority to enact such legislation, as in its wisdom, it might deem proper to provide the necessary funds to render the power thus granted effective and adequate as applied to the existing conditions within this state in the Hght of which the people of the state adopted said amendment. It is urged that the enactments in question are in violation of the Fourteenth Amendment to the federal constitution. It is the contention of plaintiff that the effect of this rural credits law deprives him of his property without due process of law, and denies to him the equal protection of the law guaranteed by the constitution. We are of the view that this contention is not tenable. It was not the purpose of this amendment to prevent the states from classifying the subjects of legislation and making different regulations as to the property of different individuals differently situated. This provision of the constitution is satisfied if all persons similarly situated are treated alike in privileges conferred or liabilities imposed, the test being whether or not the classification rests upon some difference bearing a reasonable and just relation to the act in respect to which the classification is proposed, though it need not always depend on scientific or marked distinctions in things or persons or relations; but it suf- fices if it is practical and not palpably arbitr^v. 9 Fed. St. Ann., p. 546. In Barbier vs. Connolly, 113 U. S. 27, 28 Law Ed. 923, the court among other things said: "Neither the amendment, broad and compreiiensive as it is, nor any other amendment, was designed to interfere with the power of the state, sometimes termed its police power, to prescribe regulations to promote the health, peace, morals, education, and good order of the people, and to legislate so as to increase the industries of the state, develope its re- sources, and add to its wealth and prosperity. From the very necessities of society, legislation of a special character, having these objects in view, must often be had in certain districts, such as for draining marshes and irrigating arid plains. Special burdens are often necessary for general benefits — for supplying water, preventing fires, lighting dis- tricts, cleaning streets, opening parks, and many other ob- jects. Regulations for these purposes may press with more or less weight upon one than upon another, but they are designed, not to impose unequal or unnecessary restrictions upon any one, but to promote, with as little individual in- convenience as possible, the general good. Though in many respects special in their character, they do not furnish just ground for complaint if they operate alike upon all persons and property under the same circumstances and conditions." The question involved in Hill v. Rea, (Mont.) 158 Pac. 826, was very similar to the question involved in this case. In that case the farm loan act of the state of Montana, being Chap. 28, 15 Laws of 1915, was involved. | In that case it was urged, the same as here, that the farm loan act was in violation of the Fourteenth amendment; but the court held that the classification of real prop- erty into urban and non-urban, in establishing a system for making loans solely on non-urban property, was not an unreasonable or unconstitutional classification within the purview of the Four- teenth amendment. In a state so exclusively agricultural as this, whatever will foster, encourage, develop and improve farm prop- erty will result in benefit to the urban property owners. In this state the value of city property depends to a great extent upon the development and improvement of surrounding farm land. Whatever tends to develop and improve farm lands tends also for the general good and general welfare of the entire people of this state whether city or otherwise, and it is not unjust dis- crimination, under such circvimstances, to tax city property for the purpose of maintaining a rural credit system such as is in- volved in this action. Therefore we are of the opinion that the rural credits law in question is neither in conflict with the Four- teenth amendment to the federal constitution nor any of the pro- visions of the constitution of this state. We are also of the view, after careful examination, that said enactments in question were regularly and lawfully passed and enacted in accordance with the constitutional provisions of this state relative to the enact- ment of laws, and that said Chapters 333 and 334, Laws of 1917, are now in full force and effect. The application*for writ of prohibition is denied. GATES, P. J. (Concurring Specially). The majority opinion says of the 1916 amendment to Art. 13, § 1 of the Constitution: "To expressly give power to the legislature to enact such a law the said amendment was adopted." The writer of the opinion said the same thing in his separate advisory opinion to the Governor, 38 S. D. 649, 162 N. W. 542. I think such statement violates the universal rule of construc- tion of state constitutions. When the people of this state adopt- ed the constitution they said: "The legislative power of the state shall be vested in a legislature." Art. 3, § 1. In my opinion that was the gift or grant of legislative power, and no subsequent gift or grant of legislative power to the legis- lature has ever been made or attempted to be made. It was a plenary power except as otherwise restricted in the constitution or by amendments thereto. One of these restrictions was con- tained in Art. 13 § 1 which, prior to the 1916 amendment, pre- vented the state from engaging in the farm loan business. It is my view that the amendment of 1916 was not a grant of power but was a mere removal of a restriction theretofore existing upon the exercise of such power. That being the case, we must view the matter as though there were nothing specific in the constitu- tion, either pro or con, with reference to engaging in the farm loan business. Without any restriction in the constitution, the legislative power is unquestionably broad enough to sanction such business. But there were other restrictions upon the legis- lative power, one of which was contained in Art. 13 § 2 with ref- erence to limitation of indebtedness. The majority are of the 16 view that this limitation of indebtedness was removed as to the farm loan business, substantially because it would not be practi- cal to organize such business upon a $100,000 limit of mdebted- ness. It seems immaterial to me whether the state must borrow $100,000, $1,000,000, or even more, in order to successfully trans- act the business. Even if the constitutional amendment were a grant of power instead of the removal of a restriction and even if the obligations to be issued constitute a debt within the mean- ing of Art. 13 § 2, yet it would not necessarily follow that the law enacted by the legislature provides the only method of in- stituting and carrying on the farm loan business. It would not necessarily follow that to successfully carry on the business the state must incur a debt in excess of the constitutional limit. In my opinion Art. 13, § 2 has not been affected by the re- moval of the restrictions contained in the 1916 amendment. Let me illustrate by another clause in Art. 13, § 1. The loaning or giving of credit or making donations was by the original section prohibited "except for the necessary support of the poor." Sec- tion 2 of said article does not except the support of the poor from the $100,000 limit of indebtedness. Clearly an indebtedness incurred to provide support for the poor would be an indebted- ness within the meaning of that section. Suppose section one is amended by striking out the above exception. Can it be logically urged that there would then be no limit to which the state might go in providing for the support of the poor? It seems to me that the mere statement of the case carries* with it its own an- swer. I think the matter before us should be solved according to the views of the majority of the Judges in their opinion to the Governor, 38 S. D. 635, 162 N. W. 536, to-wit: that the oWiga- tions to be incurred under the Rural Credits Act do not con- stitute an indebtedness within the meaning of Art. 13, § 2. I am further of the poinion that if, by reason of maladminstration of the Rural Credit funds, this state should not be able to meet its obligations arising from the carrying out of the act, still the defiicit would not be an indebtedness within the meaning of the section of the constitution last cited because provision is made for a tax levy by the Tax Commission to take care of such deficit and because a debt arising out of a tort is not such a debt as is contemplated by said section of the constitution. Upon the other phases of the matter I agree with the ma- jority opinion, and therefore concur in the view that the appli- cation for the writ of prohibition was properlv denied WHITING, J. Having been absent from the state at the time of the oral argument herein, as well as at the time of the handing down of the Court's decision, I feel constrained to refrain from taking any part in the formal opinion though present in court at the time of its fiiling. (H. B. 414) AN ACT 'Entitled, An Act EsLablishing and Maintaining by IJii' State of South Dakota a System of Rural Credits * ' * * Be It Enacted by the Legislature of the State of South Dakota: § 1. The following words and phrases in this act shall uidess the same be inconsistent with the context be construed as fol- lows: 1. That whenever the words "First JMortgage" are used in this act it shall be held to include such classes of first liens on farm lands as shall be approved by the South Dakota Rural Credit Board and the credit instruments secured thereby. 2. The terms "Farm Land," "Farm," and "Farms" shall be held to include: (a) Lands used principally for raising agricultural pro- ducts ; (b) Lands used principally for dairying purposes; (c) Lands or ranches used principally for live stock pur- poses. 3. The word "Board" wherever found shall men "South Dakota Rural Credit Board." §2. For the purpose of fostering and encouraging lagriculture, dairying and live stock raising in the state of South Dakota and the development and improvement of farm lands, there is here- by created and established in this state a system of rural credits to be controlled and managed by the "South Dakota Rural Credit Board" which shall have charge of the execution of this act and all acts amendatory thereto; shall establish and maintain a sys- tem of rural credits and shall maintain its office at the seat of Government of this state. Said Board shall consist of five (5) members, one of whom shall be Governor of this state, who shall be ex-ofTicio President of the Board, and four (4) members to be appointed by the Governor. The four (4) members to be appointed by the Governor shall be citizens of the state of South Dakota and persons of ex;perience in finances, loaning money and determining real es- tate values, and shall be so selected that the Board will not be composed wholly of persons who are members of or affiliated with the same political party or organization. One member shall be designated and known as the Rural Credit Commission-^ er and shall receive an annual salary of $3,000.00, payable monthly, together with all actual necessary traveling expenses while discharging the duties of his office. Another member shall be named and designated as "Treas- 124 lil'l'l' ol ,lii' SiiuUi iJakolii Rural (ii'rilil IJdanI' and shall receive animallv a siilary of f.^J M )().()( I payaMr monthly, together with (iclual lirccssary Iravrlin^ rxpfiiscs \\-hilc .liscliarging the duties of Ills office. Two other uienibrrs shall he aiipojnted by the Governor, one of whom shall he nanird by the Board as Mcc President. and I'fich shall receive a ]ier ilimi of ^(\.iH) \irv day and actual ncccssai'y li'iividin^ cxprnsrs whih' discharging thi' duties of his office, payable nnuithly. Tlic Board shall designate one of their memlicrs as Si'cridary of the Board. The terms of office shall hi' four years. exce])t that tlu' (liunmissimicr sliall first be ap- pointed bir a one yi'ar term, the Treasunu" for a two year term, one of the other members for a three yi'ar term and one for a four year term. The C.uM'rnor ma\' remove them at any time wlnui, in his jiidiinnud, Ibey liax'e tailed to projiei'ly and efTiciently allend to the duties of their office. The mi'inliei' ili'signated as ■'\'iee President" sliall in the absence or disability of the fiover- nor lie the jiresidihi; idl'icer of the Board. Tile (lommissidMer shall reside at the seal nf governmeut and sliall devote his entire lime to llie duties of his oirice. ij 3. The (ln\ei'nor shall fill all \-acancies on saiil Board by ap- iiilnieiit but llie member or nieinbeijs so appointed shall hold eh office only for the uni'xpii'ed ])art of the term. § i.. before enterini^ ujion their duties, the inendiers of said Hoard, excejit llie (liAernor, shall take and subscribe to an otfi- cial oatli I'nv the biilliful jierformance of their dulies, and to siiji|iorl the (loiislilulioii of Ihe United Slates and of the State of South Dakota, \\hiili oath shall be filed in Ihi' olfice of the Secretar\" lA' .Slate, and each of llie iiienibei's of said Board, ex- cepting llie (liivernor, shall furnish a bond or undertaking in Ihe sum of not less than •f.l.iUKi.Oii for the faithful performance of llie dulies of his olfice, in some i'e|iulable Surety Company, to be approved and kept in liki' manner as bomls nr undertak- ings given by oilier slale cifficei's; but Ihe ('mvernor may from lime to time require any niembci' of said Board to furnish an additional bond or undertaking in siudi sum as he may direel. and such bond shall always be snlVicienl to indemnify the state against loss. §.-). It shall be the duty of >aid Board In I'sUrblish, not later than July 1st, 1!)17, and maintain al the seat of (iovernment of this state, a system of Rural Credits, and such Board shall have the pm\-er to provide for lis olfice, necessary furniture, fixtures, sta- tionery and su]iplies, lo adojil rules and regulations proper and necessary for the condiud of its business ami lo receive appli- 125 p,r sill cations for farm loans, approve same and borrow money (tn llic good faith and credit of tlic state of South Dalcota, to l)u used in lending money on real estate as herein provided, to receive from the Treasurer of the State of South Dakota moneys appropriated for the establishment and maintenance of such system; to ac- quire and dispose of such property, real and person, as may be necessary w convenient for the transaction of its business, pro- vided, that such properties shall be taken for a pre-existent debt; to issue warrants or bonds payable by the State of South Dakota, bearing interest at not to exceed 5 per cent per annum in such amounts as may be necessary or convenient for the transaction of its business and sell the same at not less than their par value, but the whole -amount of bonds and warrants outstanding at any time shall never exceed the total amount of cash on hand and in banks and of mortgages then held by and in the possession of said Board computed at the face of said mortgages and exclusive of the reserve fund provided for in this act. Before issuing such warrants or bonds it shall be the duty of the Board to furnish the Governor a fmancial statement showing the condition of the business of the Board and such other and further information as may be required by him, which statement shall be filed in the office of the Governor and a copy thereof shall then be transmitted to the Secretary of State to be filed and kept by him as a permanent record of his office. NA'henever any such warrants or bonds are issued by the Board it shall be the duty of said Board to promptly submit to the Governor a full statement thereof, which statement shall be filed in his office and a copy there«f shall be trans- mitted to the Secretary of State to be filed in his office as a permanent record; to employ by and with the approval of the Governor, assistants, clerks, laborers, attorneys and other em- ployees as it may deem necessary to conduct the business of said Board. To fix the bonds, salaries or fees of such em- ployees, and to fix the fees, costs and charges to cover the ex- penses of the Board in making loans. To define the duties of the officers, agents and employees of said Board, and all such officers and employees shall be under the direction and author- ity of said Board in all matters not inconsistent with the pro- visions of this act; and to make, to the Governor, annually, a full report of its business for the preceding fiscal year with such general information and recommendations as may to the Board seem proper. It shall be the duty of said Board to make a monthly statement of its business upon such forms as may be required by the Executive Accountant, and it shall be the 126 duly of said Arcuiiiilant (u audit said statements and malic a writlen report lliereon, wliich shall be filed in his olTice, as a ])ermanent record, a cnjty of which shall be forthwith traiis- niitled to the (iovernur and to the Secretary of said Board. The Board shall exercise all such incidental powers as shall be necessary to carry on the business herein described. § (i. The RLiral Credit Cunniiissioner shall be the Chief Execu- live officer, and shall have the general supervision, under and by direction of the Board, uf the i>usiness, ofTicers and em- ployees of said Board. § 7. The Biiard - or c()n^'enient for the con- diicl of the busini'ss of liis otfice, and shall do and perform such olher acts as may be reijiiired of him by said Board. § !'. It •-ball he Ibe dul>- of the Treasurer of said Board lo keep the books of account of said Board: to receive and keep safely the moneys of said Board or of the state of South Da- kola that may come into his possession, and shall keep in his cure and cuslody all promissory noles. mortgages or other securities or evidences of indebtedni'ss, and muniments of title acquired or received by said Board for moneys lent on real estate; to sign all bonds and warrants; to render monthly slali'nients to the Board of the transactions of his office and to do and perform any and all other acts as may be directed liy the Board. § to. Before any mortgage loan is madeby said Board the ap- plication therefor shall lie referred to the Rural Credit Gom- missioner who shall make, oi' cause to be made, an appraisal of and a written report upon the land offered as security for such loan. No such loan shall be made unless such written report is filed with the Secretary of said Board and considered and approved liy the Board. § 11. Said Board sliall make loans onlv upon the following terms and conditions: 127 1. Said loan shall be secured by a duly recorded first mortgage on farm land within this state. 2. Every such mortgage shall contain an agreement pro- viding for the repayment of the loan on an amortization plan by means of annual or semiannual installments so computed as to pay the interest on the loan according to the terms of the mortgage, and also such amounts to be applied on the prin- cipal as v^'ill terminate the debt within an agreed period of not less than five years nor more than thirty years; provided, that after five years from date of such mortgage, additional pay- ments for part or all of the principal may be made on the anual or semiannual payment date under such rules and reg- ulations as the Board may prescribe; provided, further, that on the application of the borrower the Board may in its dis- cretion provide in the mortgage for the payment of interest only during the first five years and thereafter for the payment of both interest and principal on the amortization plan. The Board may lend money on, and take as security for same, farm lands subject to liens or assessments for drainage, reclamation or irrigation purposes, payable in installments, not due at the time of making such loan, and the mortgage taken to secure the loan shall, notwithstanding said liens or assess- ments, be deemed a first mortgage within the meaning of this act, provided, however, that the amount of said liens or assess- ments shall be considered by the Board in determining the amount to be loaned on such farm lands. 4. Such loans may be made for the following purposes and no other: (a) To provide for the purchase of farm land; (b) To provide for the purchase of equipment, fertilizers and live stock necessary for the proper and reasonable oper- ation of the mortgaged farm land; the term "equipment" to be defined by the Board; (c) To provide for the buildings and other improvements of farm lands; the term "improvements" to be defined by the Board; (d) To liquidate indebtedness of the owner of the land mortgaged existing at the time of the organization of said Board or indebtedness subsequently incurred for purposes mentioned in this section. 5. No such loan shall exceed seventy (70) per cent of the value of the land as ascertained and fixed by the Board, plus forty (40) per cent of the insured value of the improvements; provided, that for the purpose of this act the value of the improvements 128 shall in no rose exi'coil fifty (50) pur cent of the value of the land, and provided, further, that iji no case shall any farm improvenu'uls be considered worth more than five thousand dollars (-$5,000.00). In no case shall a loan be made in excess of the averayu assessed valuation for the three preceding years as aseertained from the (Jduiily Auditor in the county where the land is situated. The Board shall require that the property be appraised liy cumjieteiil ayeids and in no event shall a loan be made except upon the apjiroval of the Board. A majority ul' the linarii shall cuuslitute a quorum, but uo loan shall be made except upon the affirmative v(jte of three (3) members, and the reeurds of the meeting shall sliuw which uieinJiers voted to approve the loan. A re-appraiscmeiit may be jiurmitted at any time in the discretion uf the Bnard ami sucji additional loan may be granted as such re-appraisal ma\" warraid under the ijnivisions uf this sectiuii. ^^'benever the amount of Ibe loan applied for exceeds the amount herein limited, such loan may be granted tu the amount permitted under the terms of this section, with- out requiring a new application or appraisal. 6. Xo such loan shall lie made to any person who is not at the lime, or shortly to become, engaged in the cultivation and development (d' Ibe farm laud morlgaged. In case of tlie sale of the morlgaged laud the Board ujay ])erniit said mort- iin^i' of llie veuilor lo l)L' assiuui'ii by the purchaser or by the heirs of Ihe di'ceasi'il moi'l^agor. 7. The amount of loans to any one borrower shall never exceed a maxinuun sum of ten thousand dollars (iplO.dUO.OO), nor shall an\- loan lie for a less sum llian live hundred dol- lars (fSOO.OO). 8. Every applicant for a loan under this act shall make application on a form to be prescribed for that purpose by the Board and sucb applicant shall stale the objects to which the proceeds of said loan are to be applied and shall furnish such other information as may be required. 9. Every borrower shall pay simple interest on defaulted payments at the rate of eight per centum per annum and by express convenant in his morlgage deed shall pay when due all laxes, liens, judgmeids, assessments and insurance, which may lie lawfnlly assessed against the mortgaged land. Taxes, liens, judgmeids, assessments or insurance not paid when due and paid by the mortgagee shall become a part of the mortgage debt and shall bear simple interest at the rate of eight per centum per annum. Every borrower shall keep insured to the satisfaction of the Board all buildings, Lhe value of which was a factor in determining the amount of the loan. Insurance shall be made payable to the mortgagee, as its interest may appear at the time of loss and at the option of the mortgagor and subject to the general regulations of the liiiard, sums so received may ibe used to jiay for rucunslru'Ctidii of the buildings destroyed. 10. Every borrower who shall be granted a loan under the provisions of this act shall enter into an agreement with the Board that if the whole or any portion of his loan shall be expended for purposes other than those specified in his original application or if the borrower shall be in default in respect to any condition or covenant of the mortgage the whole of said loan shall at the option of the Board become due and payable forthwith, provided, however, said Board may permit said loan to be used for any purpose specified in sub-section i of this section. 11. That no loan or mortgage securing same shall be im- paired or invalidated by reason of the exercise of any powei of any agent of said Board in excess of his powers herein granted or any limitations thereon or in excess of the powers granted by said Board. § l';*. \\'hen the mortgagor or his successor in interest lias fully paid any mortgage, it shall be the duty of the Board to furnish him with a proper release or satisfaction of said mortgage exe- cuted by the Loan Commissioner and attested l)y the Secretary of the Board with an impression of the Seal of the Board thereon, and the mortgage papers belonging to such loan, in- cluding abstract of title, and insurance policies assigned, shall be returned to such person § 13. All mortgages and thi' accomipanyingpromisory note or notes taken by said Board for moneys loaned shall run to the State of South Dakota as mortgagee or payee as the case may be, and all titles to property taken 'liy said Board shall run to the State of South Dakota as grantee and any real estate so acquired by the Board may be sold under such rules and regulations and upon such terms as may be determined by the Board, provided no such land shall be sold for an amount less than the indebtedness accrued thereon at the time of the ac- quisition of the title by said Board together with interesi thereon at the rate of not less than five per centum per annum until sold, unless otherwise provided by law. § 14. Bonds provided for in this iietniay be issued in denom- inations of $25.00, $50.00, $100.00, $500.00, $1,000.00 and in 130 such oLher denominations as may be determined by the Board. They shall run for specific minimum and maximum periods sub- ject to payment and retirement at the option of the Board at any time after five years from the date of their issue. They shall have interest coupons attached payable semi-annually and shall be issued in series of not less than -^25,000.00, the amount and terms to be fixed by the Board. They shall bear a rate of interest not to exceed five per centum per annum. The Board may also issue warrants when in their judgment this is necessary, but such warrants shall come under the same lim- itations as to till' total amount of money borrowed as is re- quired by the provisions of this act. The Board shall prescribe rules and regulations conerrning the manner in which such jjonds and warrants shall !)(■ sold, paid and retired under the provisions of this act. Said Bonds and warrants shall designate on their face the purposr for which same are issued and shall he signed l)y the (luvcrnor. the Commissioner and Treasurer of the Board and shall Ije attested l)y the Secretary of State with Ihu Great Seal of the State and shall bind the State of South Dakota to pay same aeeorrting to the terms thereof. The form of said bonds and warrants shall be approved by the Attorney Gen- eral. § 1.5. The Attorney (ieneral shall he the general legal ad- visor uf the Board and its officio's. §16. The morlfingor shall pay for the recording of his mortgage and other papers connected with the loan which may be re- corded. He shall furnish to the Board proper evidence of title under the Torrens system or an abstract of title to the Board at his own expense, under such rules as the Board may pre- scribe. § 17. The differenre between the rate of interest paid by the state for moneys borrowed and the interest received by the state for moneys loajied shall be and constitute a Reserve Fund. In determining and fixing the rate of interest to the borrower, not less than three-fourths of one per cent, nor more than one and one-half per cent per annum shall be added to the rate of interest contracted to be paid by the state for money bor- rowed by it. The salaries of the officers and employees of the Board and all of the expenses shall be paid from the Reserve Fund; provided, however, that such salaries and expenses may be paid from the appropriation provided in this act until a sufficient reserve fund shall be accumulated to meet the current expenses of the Board. § 18. It shall.be the duty of the Board assisted by the Execu- 131 tive Accountant, and Public Examiner, to prescribe and install in the offices of said Board such system of books, records, ac- counts, receipts, vouchers and documents required to sep- arate and verify each transaction and forms for reports and statements required, for the administration of the officers of the Board or for the information of the public, as said Board and assistants shall deem proper and necessary for the safe and convenient conduct of the business of said Board. § 19. Mortgages, promisory notes and other evidences of in- debtedness and title to real estate or other property acquired by said Board shall be held in trust for the payment of moneys borrowed by the State of South Dakota' for the purpose of es- tablishing and maintaining said system of rural credits and shall never be diverted to any other purpose, provided, how- ever, that the said Board may invest and re-invest the pro- ceeds of same in first mortgage loans as provided by this act when not required for the immediate payment of warrants or bonds, or interest on bonds. § i'O. All mortgages, real estate and other property taken by said Board in its business of loaning and all warrants or bonds issued by said Board in the transaction of its business, shall be free from all general taxes, state, county and municipal ^nd shall not be subject to State Income Tax. § '^1. iVny foreclosure of any of the mortgages provided for by this act shall be made in the usual 'manner, either by action or by advertisement, as the Board may direct. In cases of fore- closure it shall be the duty of the Attorney General to render all services needed in connection with such foreclosure pro- ceedings, and the costs, fees and expenses, now or that may hereinafter be provided by law, in the foreclosure of real estate mortgages may be taxed in the foreclosure of any mo.rtgage, in like manner, and to the same effect as if the state of South Dakota were a natural person. All sums in excess of the money actually paid out. by the Board in such foreclosure proceedings shall be paid into the reserve fund and become a part of such when collected. § 22. The Board shall designate such Banks within the state as it may deem necessary to receive the deposits of the funds of the Board and shall fix the maximum amount to be depos- ited in each. Such maximum , amounts shall in no case be •fixed at more than forty per centum of the paid up cap- ital and surplus of such bank. The Board shall require such banks, except State Banks, to give bonds for the safe keeping 132 2 H. B. 414 and return of the deposits. The bond required shall not be less than the amount of the deposit and the treasurer of the Board shall not make any deposit in any bank required to give bond before such bond has been given and approved by the Board. Such Bank shall pay such minimum rate of interest on such deposits as the Board may determine which interest shall be covered into the treasury of the Board and become a part of the reserve fund. The Board shall make such other and fur- ther regulations for the safe keeping of its funds and deriving interest on its deposits as may appear beneficial. § 23. The Treasurer shall not be liable personally upon his ofTicial bond for any moneys that may be lost by reason of the failure or insolvt'ucy of any bank wliich may be named a depository by the Board, provided, however, that the said bank named as a depository required to give bonds, shall have given such bond and the same shall have been approved by the Board before the treasurer has deposited funds of the Board therein and the treasurer has complied with further requirements of the Board imposed upon him in relation to such deposits. § 24. Whunuver a bond or undertaking is required by this act or by the Board to be given, it shall be held to mean a surety bond furnished by a Surety Company authorized and qualified to 'do business in this state. Such bonds shall run to the state of South Dakota; shall be as nearly as applicable in the form prescribed in Section 5 of Chapter 234 of the Session Laws of South Dakota for the year 1911; or laws amendatory thereto and the form thereof shall be approved by the .Vttorney General. , § 25. The cost of Surely Bonds provided by this act, furnished by the officers or employees of said Board, shall be a part of the general expense of administration and paid by the Board. § 26. There is hereby appropriated out of the moneys in the general fund, not otherwise appropriated, the sum of two hun- dred thousand dollars ($200,000.00) for the purpose of carry- ing the provisions of this act into effect. § 27. All acts or parts of acts in conflict with the provisions of this act are hereby repealed. § 28. Whereas, there is not at the present time a system of Rural Credits in this state, and it is necessary to establish such a system before July first, 1917, in order to commence doing business on that date, an emergency is hereby declared to exist and this act shall be in force and effect from and after its approval and adoption. Approved Feb. 26, 1917. 133 1 15th Session, Legislative Asiseihbly, State of South Dakota SENATE BILL No-288 Introduced by Senate Goimmiitee on Hural Oreditb, A BIIvI For Aa Act Eiittiled, An Act to Amend Section Fourleeaof of an 'Act Entitled, An Act Esita'bliishing- and Miaintaining by Mje , State; :-.of South Dakofa a System of , Rural Oredits and Providing fdrthe Loaning- of Money by4'he State of Sou!th Daltola IJipon Real Estate Within This State; Authoriziug- the. State ,jof South Dakotg. to , Borrow Money on Its Warrants and Bojpids Seouredi by the Good Faith and Credit of the Stalte for the Purpos-e ,of Maintaining Ssid System of Rural Credits; Creating the South Dakoita, Rural Credit Board for' tihe Mian'agiment Thereof; Dieflning the Powers^of Such Board and Its Offioers; and Providing for an Approipriation. nf Two Hundred Thousand Dollars ($2.00,000.00) Payable on ihe ' Order of Said' Board to be Used in Esfablishing and Maintaining Said Systemi of RuraJ Credits. ■ , , Belt JbJuacted hy the Legislature, of the State of South ' DaJx otii : '.:' Section 1. . , , ,, 1, ,, ..That .^eCtion fourteen of Houlse .Bill No. .414, .appraved ' 2 [ by the Governor February 26th, 1917, is hereby, ameaded- to 3 . reg,d as -fotlows : . ■ , . : 4 § 14. Bonds provided jlpr in this act may. be. issued in.de- .5. . .nominations of . 125.00, f50.Q0, f 100.00, .$500.00, ^$i,Q00.OO ,^nd in such other denominatdons as may be determined by the Board. They shall run for specific minimum and maximum ipepiodis subject to .payment and .retirement at the option of the Board at any time after five years from the date of their is- sue. They, shall have interest coupons attached payable semir anrauaJly and shall be issued in series of not less than $25,- 000.00, the amount and terms to be fixed by the Board. They shoJl . bear a rate of interest not to exceed five per oefnitum per annum. The Board may also issuie warrants when in their jiudigment this is necessary, but such warrants shall come under the same ijimitations as to the total amount of money borroweid as is required Iby the provisions of this act. The board shall prescribe rules and regulations concerning the manner in which suich bonds and warrants shall be sold, paid aJid re.tireid undei* the provisions of this «uct. Said bonds and warrants shall designate on their face itbe purpose for which same are issued and shall be signed by the Goveirnor, the Com- misisioner and Treasurer of 'the Board and shaW be attested by the Secretary of State with the Great Seal of the State and Bhall bind the State of South Dakota to 'pay same aooording tio the terms thereof. The form of said bonds amid warrants shall be approved by the Attorney General. If at any time tber? shall not be sufficient funds in the treasury of the South Dakota Rural Credit Board to pay the said bojidls or warrants or interest thereon at maturity thereof, o,r when same shall become due, it sihall be the duty of th^ Tax GonMnission of this state, uipon request of said Board, to make a sipeoial assessment and levy immediately to, pay same wheii due, which levy shall be collected in the same manner as other tax levies mfede (by said Gommiission. Whenever sudh tax levy shall have beeh maide it shall be the duty of 'the State Auditor u^pon the request of said Board to issue his wart-ant or warrants as said Board may 9 direct, bearing interest not to exceed five per cewtum per annum, and register same, drawn on the fund to be derived from such special levy, in an amount with interest provided in said warrAnts, not exceadiinig said levy, ^ and deliver same to said ^ Board, and such warrants- may be sold by said Board. AH moneys derived from said (sipeoial levy or from the sale of sucih ispeicial warraiite shalll be placed in a special fund to be desiignateid "Rural Gpedits Fund" and shall be used only for the payment of said warrants drawn on said fund, and the 'payment of said bonds, warrants ajid interest wh6n same be- come due. All of said moneys deriveid from said 'sipeciiai levy are heiretoy ajppropriated for the payment of the warrants drawn on said fund and the payment of said bonds, warrants and in- terest at maturity; and it is further provided that in all mat^ teps relating to said oiriginali Adt and amendiments thereto the State of South Dakota may sue and be sued £is a private in- dividual. Section 2. 1 ' : An emergeiK'\' is hereby declaimed to existj and 2 shall be in force and effect from and after its apprcii 3 adaption. LITHOMOUNT PAMPHLET BINDER Manufaetund by SAYLORD BROS. Inc. Syracuse, N. Y. Sloclcton, Calif.